SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The fiscal year ended November 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file no. 1-8846
CALTON, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW JERSEY 22-2433361
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization
125 HALF MILE ROAD 07701-6749
RED BANK, NEW JERSEY (Zip Code)
(Addresses of principal executive offices)
</TABLE>
Registrant's telephone number,
including area code: (732) 212-1280
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of each exchange
Title of Class on which registered
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<S> <C>
Common Stock American Stock Exchange
$.01 par value per share
Rights American Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value (based upon the last sales price reported by the
American Stock Exchange) of voting shares held by non-affiliates of the
registrant as of February 24, 2000 was $82,226,000.
As of February 24, 2000, 21,617,000 shares of Common Stock were outstanding.
The Company's Proxy Statement for the annual meeting of shareholders is
incorporated by reference into Part III hereof.
<PAGE>
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Disclosure Concerning Forward-Looking Statements
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All statements, other than statements of historical fact, included in this Form
10-K, including in Part II, Item 7: "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the statements under
"Business" are, or may be deemed to be, "Forward-Looking Statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," and variations of such words and
similar phrases are intended to identify such forward-looking statements. Such
forward-looking statements involve assumptions, known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements contained in this Form 10-K. Such potential risks and
uncertainties, include without limitation, matters related to national and local
economic conditions, the effect of governmental regulation on the Company, the
competitive environment in which the Company operates, potential adverse affects
of acquisitions, the ability of the Company to identify suitable acquisition
candidates, changes in interest rates, and other risk factors detailed herein
and in other of the Company's Securities and Exchange Commission filings. The
forward-looking statements are made of the date of this Form 10-K and the
Company assumes no obligation to update the forward-looking statements or to
update the reasons actual results could differ from those projected in such
forward-looking statements.
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PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
GENERAL
Calton, Inc. (the "Company" or "Calton") sold its principal
operating subsidiary, Calton Homes, Inc. ("Calton Homes"), on
December 31, 1998. See "Sale of Calton Homes." Since the completion
of the sale, the Company has been primarily engaged in providing
consulting services to the purchaser of Calton Homes and analyzing
potential business and acquisition opportunities. In addition, in
July 1999, the Company acquired substantially all of the assets of
iAW, Inc., an Internet business solutions provider in its early
stages of development. In January 2000, the Company acquired a
controlling interest in PrivilegeONE Networks, Inc.
("PrivilegeONE"), a newly formed company engaged in the development
of a co-branded loyalty credit card program.
Calton was incorporated in 1981 for the purpose of acquiring
all of the issued and outstanding capital stock of Kaufman and
Broad of New Jersey, Inc., a New Jersey corporation, from Kaufman
and Broad, Inc., a Maryland corporation. After the acquisition, the
name Kaufman and Broad of New Jersey, Inc. was changed to Calton
Homes. Calton maintains it corporate offices at 125 Half Mile Road,
Suite 206, Red Bank, New Jersey 07701 and its telephone number is
(732) 212-1280. As used herein, the term "Company" refers to
Calton, Inc. and its subsidiaries, unless the context indicates
otherwise.
SALE OF CALTON HOMES
On December 31, 1998 (the "Closing Date"), Calton completed
the sale of Calton Homes, its wholly owned homebuilding subsidiary,
to Centex Real Estate Corporation ("CREC" or the "purchaser"), the
homebuilding subsidiary of Centex Corporation (NYSE:CTX), one of
the nation's largest homebuilders (the "Sale Transaction"). The
purchase price for the stock of Calton Homes, which was paid in
cash at closing, was $48.1 million, subject to a $5.2 million
holdback, and certain post closing adjustments. The Company
recorded a pre-tax gain of approximately $7.6 million and a net
gain of approximately $4.4 million after recording a non-cash
provision in lieu of taxes of $3.2 million as a result of the Sale
Transaction in the first quarter of fiscal 1999. Calton has entered
into an agreement to provide consulting services to CREC which will
entitle the Company to payments of $1.3 million per year over the
three year period ending December 31, 2001.
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STRATEGIC PLAN
At the time of the Sale Transaction, the Company announced
that the Sale Transaction was part of a strategic plan designed to
enhance shareholder value. Pursuant to its strategic plan, the
Company commenced a stock repurchase program and announced its
intention to (i) shift the Company's primary business focus from
homebuilding to providing various services to participants both
within and outside the homebuilding industry, including consulting
services, equity and debt financing and financial advisory services
and (ii) seek to invest in, acquire or combine with one or more
operating businesses within or outside the homebuilding industry.
Pursuant to its stock repurchase program, the Company has,
since October 31, 1998, acquired approximately 6,900,000 shares of
Common Stock at an average price of $1.26 per share. The timing and
number of additional shares purchased pursuant to the stock
repurchase program will depend on a variety of factors, including
the market price of the Common Stock. Management has currently
suspended the acquisition of additional shares of Common Stock
pursuant to the stock repurchase program because recent market
prices of the Common Stock have exceeded book value.
In 1999, the Company acquired the assets of iAW, Inc. and in
January 2000, acquired a 50.4% interest in PrivilegeONE pursuant to
its strategic plan. The Company continues to analyze potential
acquisitions and other business opportunities. Pending further
implementation of the Company's strategic plan, the Company's cash
will be temporarily invested as management of the Company deems
prudent, which may include, but will not be limited to, mutual
funds, money market accounts, stocks, bonds or United States
government or municipal securities; provided, however, that the
Company will attempt to invest the net proceeds and conduct its
activities in a manner which will not result in the Company being
deemed to be an investment company under the Investment Company Act
of 1940, as amended, or a personal holding company for federal
income tax purposes. See "Certain Risks."
If by June 30, 2000, the Company has not redeployed a
substantial portion of the proceeds of the Sale Transaction, or
developed a plan to redeploy a substantial portion of such proceeds
within in a reasonable time frame, the Company, subject to
shareholder approval, will be liquidated and dissolved. Management
currently expects to deploy or have a plan to deploy a substantial
portion of the proceeds by June 30, 2000.
CERTAIN RISKS
Risks Associated with Potential Business Combinations.
The Company is seeking to enhance shareholder value by
investing in, acquiring or combining with one or more operating
businesses either within or outside of the homebuilding industry.
Management of the Company will endeavor to evaluate the risks
inherent in any particular target business; however, there can be
no assurance that the Company will properly ascertain all such
risks. In many cases, shareholder approval will not be required to
effect such a business combination. The fair market value of the
target business will be determined by the Board of Directors of the
Company. Therefore, the Board of Directors has significant
discretion in determining whether a target business is suitable for
a proposed business combination. The success of the Company will
depend on the Company's ability to attract and retain qualified
personnel as well as the abilities of key management of the
acquired companies. As a result, no assurance can be given that the
Company will be successful in implementing its strategic plan or
that the Company will be able to generate profits from such
activities.
Continued Listing on AMEX.
The Company's Common Stock is currently listed for trading on
the American Stock Exchange ("AMEX"). Under AMEX's suspension and
delisting policies, AMEX will normally consider suspending
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dealings in, or removing from listing securities of a company, if
the company has sold or otherwise disposed of its principal
operating assets, has ceased to be an operating company or has
discontinued a substantial portion of its operations or business
for any reason. AMEX has indicated that the Common Stock may become
subject to delisting if the Company is not engaged in active
business operations within a reasonable period of time after the
closing of the Sale Transaction. Although the Company is engaged in
active business as a result of its consulting agreement with CREC
and its acquisitions of iAW and PrivilegeONE, no assurance can be
given that AMEX will not commence proceedings to delist the Common
Stock. If the Common Stock is delisted, it would trade on the OTC
Bulletin Board or in the "pink sheets" maintained by the National
Quotation Bureau, Inc., which are generally considered to be less
efficient markets.
Investment Company Act Considerations.
The Investment Company Act of 1940, as amended ("1940 Act"),
requires the registration of, and imposes various substantive
restrictions on, certain companies that engage primarily, or
propose to engage primarily in the business of investing,
reinvesting, or trading in securities, or that fail certain
statistical tests regarding the composition of assets and source of
income, and are not primarily engaged in a business other than
investing, holding, owning or trading securities. The Company
intends to conduct its activities in a manner which will not
subject the Company to regulation under the 1940 Act; however,
there can be no assurance that the Company will not be deemed to be
an investment company under the 1940 Act. If the Company were
required to register as an investment company under the 1940 Act,
it would become subject to substantial regulation with respect to
its capital structure, management, operations, transactions with
affiliates, the nature of its investments and other matters. In
addition, the 1940 Act imposes certain requirements on companies
deemed to be within is regulatory scope, including compliance with
burdensome registry, recordkeeping, voting, proxy, disclosure and
other rules and regulations. In the event of the characterization
of the Company as an investment company, the failure of the Company
to satisfy regulatory requirements, whether on a timely basis or at
all, could have a material adverse effect on the Company.
Certain Tax Matters.
Section 541 of the Internal Revenue Code of 1986, as amended
(the "IRC"), subjects a corporation which is a "personal holding
company," as defined in the IRC, to a 39.6% penalty tax on
undistributed personal holding company income in addition to the
corporation's normal income tax. The Company could become subject
to the penalty tax if (i) 60% or more of its adjusted ordinary
gross income is personal holding company income and (ii) 50% or
more of its outstanding Common Stock is owned, directly or
indirectly, by five or fewer individuals. Personal holding company
income is comprised primarily of passive investment income plus,
under certain circumstances, personal service income.
Indemnity Obligations
The stock purchase agreement pursuant to which the Company
sold Calton Homes requires the Company to indemnify the purchaser
for, among other things, breaches of the agreement and certain
liabilities that arise out of events occurring prior to the closing
of the sale including the cost of warranty work on homes delivered
if such costs exceed $600,000. On the Closing Date of the Sale
Transaction, the Company deposited an aggregate of approximately
$5.2 million in escrow, $3 million of which provides security for
the Company's indemnity obligations (the "General Indemnification
Funds") and approximately $2.2 million of which were deposited to
fund costs associated with certain specified litigation (the
"Specific Indemnification Funds"), involving Calton Homes. During
1999, the Company refunded to the purchaser $700,000, paid out of
the General Indemnification Funds as a part of a settlement
agreement and related post closing adjustments; also the Company
collected $592,000 from the Specific Indemnification Funds as a
result of a certain litigation settlements and legal fee
reimbursements. In January, 2000 the Company collected
approximately $1.0 million from the General Indemnification Funds.
As of February 1, 2000 there was approximately $1.5 million in the
General Indemnification Funds and $1.5 million in the Specific
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Indemnification Funds. In January, 2000 the purchaser asserted an
indemnification claim against the General Indemnification Funds in
the amount of $253,000. However the Company believes it has
meritorious defenses against this claim. It is uncertain as to
whether this claim will enter into arbitration proceedings. Under
certain circumstances, the Company may be required to deposit
additional funds into escrow. In addition, the Company's indemnity
obligations are not limited to the amount deposited in escrow. No
assurance can be given that the purchaser of Calton Homes will not
make additional claims for indemnity or that a significant portion
of the escrowed funds will not be utilized to resolve litigation.
See "Legal Proceedings."
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The information required by this item is presented in Note 3
of the 1999 Financial Statements located on page F-9 of this
report.
(C) DESCRIPTION OF BUSINESS
GENERAL
With the sale of Calton Homes, the Company discontinued its
homebuilding operations. Since the completion of the Sale
Transaction, the Company has been primarily engaged in providing
consulting services to the purchaser of Calton Homes and analyzing
potential acquisitions and other business opportunities. In July
1999, the Company acquired substantially all of the assets of iAW,
Inc., an Internet business solutions provider. In January 2000, the
Company acquired a 50.4% interest in PrivilegeONE.
ECALTON.COM
In July 1999, the Company acquired iAW, Inc. an Internet
business solutions provider. The Company conducts the acquired
business though a wholly owned subsidiary that has changed its name
to eCalton.com, Inc. ("eCalton"). The purchase price for the
acquisition, which was structured as an asset purchase, was
$250,000. eCalton provides Internet strategy consulting and
comprehensive Internet-based solutions. By combining extensive
business and Internet knowledge with creativity, eCalton provides
its customers with the resources and tools to optimize, monitor,
and measure the effectiveness of each component of their
e-business. eCalton provides Internet-based solutions to small,
medium, and large companies.
Sales and Marketing.
eCalton's national marketing office is headquartered in Vero
Beach, Florida. The company markets its products and services
through telemarketing, face to face interviews with client
executives, and through the eCalton web site.
In order to completely understand the needs of its clients,
eCalton uses a three-step process that allows eCalton to evaluate
the client's Internet practices, and transform the client's
Internet business presence into one that provides a competitive
business advantage, referred to as an Internet Best Practices
Audit:
Step one is a visit to the client facility for a series of
interviews with senior executives responsible for setting corporate
strategy. This interview allows eCalton to gain a basic
understanding of the clients overall e-business strategy,
competitive situation, immediate and long-term goals.
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Step two is to conduct a complete assessment of the client's
current Internet presence and to formulate an e-business strategic
plan to satisfy all of the client's needs. eCalton evaluates the
effectiveness of the web site, and compares and contrasts the site
to industry best practices, including measuring the "visibility" of
the Website with the most effective Internet search tools
available.
The third step is for eCalton to present the results to its
client and direct the implementation of the solution. The Internet
Best Practices Audit includes a written report with assessments and
recommendations.
In most cases, once the solution has been implemented, eCalton
continues to partner with its clients to ensure that the solution
continues to meet the clients' changing e-business requirements and
to allow for potential future revenue opportunities for eCalton.
In addition to marketing its services to its client, eCalton's
marketing efforts are also dedicated to creating brand name
awareness and enhancing its reputation as a complete Internet-based
solutions provider.
Competition.
The market for Internet professional services is relatively
new, intensely competitive, rapidly evolving and subject to rapid
technological change. While relatively new, the market is already
highly competitive and characterized by an increasing number of
entrants that have introduced or developed products and services
similar to those offered by eCalton. The Company expects
competition not only to persist, but to increase. Increased
competition may result in price reductions, reduced margins and
loss of market share. eCalton's competitors and potential
competitors have longer operating histories, larger installed
customer bases, greater name recognition, longer relationships with
their clients, and significantly greater financial, technical,
marketing and public relations resources than eCalton. As a result,
eCalton's competitors may be better positioned to react in the
ever-changing market place. eCalton expects competition to persist
and intensify in the future.
PRIVILEGEONE
General.
In January 2000, the Company acquired a 50.4% collective
direct and indirect (through ownership in a parent company)
interest in PrivilegeONE Networks, Inc. PrivilegeONE was formed in
1999 to develop customer loyalty programs through the use of a
co-branded credit card related to the automotive industry.
In order to execute the PrivilegeONE business plan,
PrivilegeONE management is currently pursuing arrangements with
financial institutions to issue and process credit cards marketed
by PrivilegeONE. Until such an arrangement is secured, PrivilegeONE
will be unable to execute its business plan.
The purchase price for the Company's interest in PrivilegeONE
was comprised of $105,000 of cash and a five-year warrant to
acquire 1,200,000 shares of the Company's Common Stock at an
exercise price of $2.50 per share. The warrant becomes exercisable
only if PrivilegeONE surpasses certain specified earnings targets.
In addition to its equity interest, the Company has agreed to loan
up to $1,500,000 to PrivilegeONE pursuant to a note which bears
interest at the rate of 10% per annum and becomes due in January
2004. The Company has the right to designate a majority of the
Board of Directors of PrivilegeONE until the later of the time that
the note is repaid or January 2004. The Company has entered into
shareholder agreements with the other shareholders of PrivilegeONE
and its parent company which obliges each of the shareholders to
offer his or its shares in PrivilegeONE or its parent to the other
shareholders in the event that the shareholder wishes to transfer
his or its shares. The shareholder agreements also grant the
Company the preemptive right to acquire a proportionate share of
any additional
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securities issued by PrivilegeONE or its parent and provide that
certain corporate actions may not be taken without the
Company's approval.
Sales and Marketing.
PrivilegeONE intends to market its program directly through a
national sales force. PrivilegeONE is seeking to develop a number
of customer acquisition and loyalty strategies centered around the
acceptance and use of its cards, including reward and other
programs designed to promote card use. PrivilegeONE also intends to
develop an Internet site through which it will seek to develop
strong relationships with and provide services to customers.
Competition.
The credit card industry is characterized by intense
competition. PrivilegeONE will compete with numerous co-branded
credit card programs, including reward based programs. Many of
these programs are sponsored by entities with greater resources and
name recognition than PrivilegeONE. As a result PrivilegeONE's
competitors may be better positioned to react in a changing market
place.
CONSULTING SERVICES
The Consulting Agreement requires the Company to provide
certain consulting services to CREC, including information, advice
and recommendations with respect to the homebuilding market in New
Jersey and Pennsylvania. The Company has agreed that it will not
provide similar services to others in New Jersey or Pennsylvania
during the term of the Consulting Agreement and for a four year
period after the expiration of the three year term of the
Consulting Agreement.
The Consulting Agreement requires Anthony J. Caldarone, the
Company's Chairman, President and Chief Executive Officer to
participate in the performance of the consulting services to CREC
and for so long as he remains employed by or associated with the
Company.
In consideration for the services provided by the Company
under the Consulting Agreement, CREC is required to pay the Company
a consulting fee of $1.3 million per year, payable in equal
quarterly installments during the three year term of the agreement.
Other than the Consulting Agreement, the Company has not entered
into any arrangements to provide consulting, investment or advisory
services to any third parties.
EMPLOYEES
As of February 25, 2000, the Company employed eight full time
personnel, and one part time employee; the Company's subsidiary,
eCalton.com, Inc., employed 24 full time personnel and two part
time employees; PrivilegeONE employed 9 full time personnel.
The Company believes that its employee relations are
satisfactory.
ITEM 2. COMPANY FACILITIES
The Company currently leases approximately 2,100 square feet
of office space located in Red Bank, New Jersey, for approximately
$4,700.00 per month. The term of this lease is on a month-to-month
basis. The Company also leases approximately 1,790 square feet of
temporary office space on a month-to-month basis in Vero Beach,
Florida, for approximate $2,200.00 per month, until its permanent
space is available at the end of May 2000. The permanent space at
the same location will consist of approximately 3,815 square feet,
at a monthly rate of approximately $5,722.00, for a term of 5
years.
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The Company's subsidiary, eCalton, currently leases
approximately 4,000 square feet of office space, for approximately
$4,700 per month. The term of this lease is on a month-to-month
basis. PrivilegeONE currently leases 2,000 square feet of office
space in Rhode Island at a cost of $900.00 per month on a month to
month basis.
Management believes that these arrangements currently provide
adequate space for all of the Company's business operations.
ITEM 3. LEGAL PROCEEDINGS
The stock purchase agreement pursuant to which the Company
sold Calton Homes on December 31, 1998 requires the Company to
indemnify the purchaser for, among other things, breaches of the
agreement and certain liabilities that arise out of events
occurring prior to the closing of the sale. On December 31, 1998,
as a condition to the sale of Calton Homes, the Company entered
into a holdback escrow agreement with the purchaser pursuant to
which approximately $5.2 million of the closing proceeds were
deposited into escrow. Of this amount, $3 million (the "General
Indemnification Funds") were deposited to provide security for the
Company's indemnity obligations and approximately $2.2 million (the
"Specific Indemnification Funds") were deposited to fund costs
associated with certain specified litigation involving Calton
Homes. During 1999, the Company refunded $700,000 to the purchaser,
out of the General Indemnification Funds as a part of a settlement
agreement and related post closing adjustments. The Company
collected $592,000 from the Specific Indemnification Funds in 1999
as a result of a certain litigation settlements and legal fee
reimbursements. In January 2000, approximately $1.0 million was
released to the Company from the General Indemnification Funds
pursuant to the terms of its agreement with the purchaser. As of
February 1, 2000 there was approximately $1.5 million in the
General Indemnification Funds and $1.5 million in the Specific
Indemnification Funds. In January 2000, the purchaser asserted a
$253,000 claim for indemnification related to certain alleged
misrepresentations and liabilities allegedly arising out of the
events occurring prior to the sale of Calton Homes. The Company and
the purchaser are attempting to resolve this claim and it is
uncertain as to whether this claim will enter into arbitration
proceedings. However, the Company believes it has meritorious
defenses against this claim. The remaining General Indemnification
Funds will be disbursed to the Company, subject to claims for
indemnification, on December 31, 2000. The Specific Indemnification
Funds will be disbursed, to the extent not otherwise utilized in
the resolution of litigation, on a case by case basis as the
litigation is resolved. If all of the specified litigation is not
resolved by December 31, 2000, a portion of the General
Indemnification Funds will not be disbursed to the Company until
the resolution of the litigation. The Company may, under certain
circumstances, be required to deposit additional funds in the
holdback if all of the specified litigation is not resolved by
December 31, 2000. In addition, the Company's indemnity obligations
are not limited to the amounts deposited in escrow. In the event
that the Company elects to liquidate and dissolve prior to December
31, 2003, it will be required to organize a liquidating trust to
secure its obligations to the purchaser. The liquidating trust will
be funded with the Specific Indemnification Funds plus, $3 million
if created between December 31, 1999 and December 31, 2000 and $2
million if created after December 31, 2000. If the liquidation
occurs prior to December 31, 2000, the Company may be required to
deposit additional amounts in the Liquidating Trust if the
specified litigation is not resolved by such date. Any General
Indemnification Funds remaining in the holdback escrow fund will be
applied as a credit against amounts required to be deposited in the
liquidating trust.
Although the Company believes it has adequately reserved for
the resolution of all of the litigation associated with the
indemnity obligations, there is no assurance that the ultimate
resolution of the pending litigation will not result in additional
charges to discontinued operations or the Company will collect all
of the remaining holdback escrow.
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Calton's by-laws contain provisions which provide
indemnification rights to officers, directors and employees under
certain circumstances with respect to liabilities and damages
incurred in connection with any proceedings brought against such
persons by reason of their being officers, directors or employees
of Calton.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, no matter was submitted to
a vote of security holders through the solicitation of proxies or
otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of February 24, 2000
are listed below and brief summaries of their business experience
and certain other information with respect to them is set forth in
the following table and in the information which follows the table:
<TABLE>
<CAPTION>
Name Age Position
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<S> <C> <C>
Anthony J. Caldarone 62 Chairman, President and Chief Executive Officer
Maria F. Caldarone 36 Vice President of Corporate Development
David J. Coppola 40 Vice President and Treasurer
Kelly S. McMakin 38 Senior Vice President of Accounting
</TABLE>
Mr. Caldarone was reappointed as Chairman, President and Chief
Executive Officer of Calton in November 1995, having previously
serviced in such capacities from the inception of the Company in
1981 through May 1993. From June 1993 through October 1995, Mr.
Caldarone served as a Director of the Company.
Maria Caldarone served as the Director of Business Development
from January 1999 until she was appointed as a Vice President of
the company in February 2000. From 1995 through January 1999 Ms.
Caldarone was a non-practicing attorney. Prior to 1995 Ms.
Caldarone was employed by Trafalgar Homes, from December 1993 to
November 1994 where she served as Director of Land Acquisition. Ms.
Caldarone is a licensed attorney in the state of Florida. Ms.
Caldarone is the daughter of Mr. Caldarone.
Mr. Coppola was appointed Treasurer of the Company in January
1999. He served as the Company's Controller from 1992 until 1999
and was appointed as a Vice President of the Company in 1993. Mr.
Coppola is a Certified Public Accountant.
Mr. McMakin was appointed Senior Vice President of the company
in January 2000. From 1993 through January 2000, Mr. McMakin served
as Controller and Treasurer of Florafax International, Inc., a
publicly traded floral wire service and credit card processor
headquartered in Vero Beach, Florida. Mr. McMakin is a Certified
Public Accountant.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Calton, Inc. common stock is traded on the American Stock
Exchange ("AMEX") under the symbol CN. The following reflects the
high and low sales prices of the common stock during fiscal 1999
and 1998.
FISCAL 1999 High Low
------- -------
1st Quarter.............. $ 1-1/2 $ 1
2nd Quarter............... 1-3/8 1
3rd Quarter.............. 1-9/16 1-5/16
4th Quarter.............. 1-7/8 1-3/16
FISCAL 1998 High Low
-------- -------
1st Quarter.............. $ 5/8 $ 7/16
2nd Quarter............... 7/8 5/8
3rd Quarter.............. 3/4 9/16
4th Quarter.............. 1-1/8 3/4
At February 15, 2000, there were approximately 577 record
holders of the Company's common stock. On that date, the last sale
price for the common stock as reported by AMEX was $4.94. The
Company did not pay any dividends on its Common Stock during fiscal
1999.
In July 1999, the Company issued options to acquire 600,000
shares of Common Stock at an exercise price of $1.63 per share to
Kenneth D. Hill, Matthew Smith and Robert Hill pursuant to
employment agreements between such individuals and eCalton that
were executed in connection with the acquisition of the assets of
iAW, Inc. Each of such options has a 10 year term and is
exercisable in three equal annual installments commencing on the
anniversary date of the date of grant. The grant of the options was
made in reliance upon the exemption provided by Section 4(2) of the
Securities Act of 1933 as a transaction not involving any public
offering.
In January 2000, the Company issued a warrant to acquire
1,200,000 shares of the Company's Common Stock at an exercise price
of $2.50 per share to Taytrowe Van Fecthmann World Companies, Inc.,
the parent company of PrivilegeONE, in connection with the
acquisition of the Company's interest in PrivilegeONE. The warrant,
which has a term of five years, is not exercisable unless
PrivilegeONE surpasses certain specified earnings targets. The
warrant was issued in reliance upon the exemption provided by
Section 4(2) of the Securities Act of 1933 as a transaction not
involving any public offering.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth historical selected financial
information of the Company as of the dates and for the periods
indicated. The data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial
Statements and Notes thereto include elsewhere in this report.
<TABLE>
<CAPTION>
(in thousands, except per share amounts) Years Ended November 30,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA
Revenues................................................ $ 3,196 $ - $ - $ 1,292 $ 9,090
Net income (loss) from continuing operations............ 661 (1,960) (1,901) (1,736) (1,660)
Net income (loss) from discontinued operations(1)....... (240) 6,315 1,646 2,189 (1,478)
Net income from sale of operating businesses............ 4,418 - 369 - -
Extraordinary gain, net of income taxes................. - - 1,263 - -
Net income (loss)....................................... 4,839 4,355 1,377 453 (3,138)
Basic earnings (loss) per share:
Net income (loss) from continuing operations............ .03 (.07) (.07) (.06) (.06)
Net income (loss) from discontinued operations(1)....... (.01) .23 .06 .08 (.06)
Net income from sale of operating businesses............ .19 - .01 - -
Extraordinary gain, net of income taxes................. - - .05 - -
Net income (loss)....................................... .21 .16 .05 .02 (.12)
Diluted earnings (loss) per share:
Net income (loss) from continuing operations............ .03 (.07) (.07) (.06) (.06)
Net income (loss) from discontinued operations(1)....... (.01) .23 .06 .08 (.06)
Net income from sale of operating businesses............ .18 - .01 - -
Extraordinary gain, net of income taxes................. - - .05 - -
Net income (loss)....................................... .20 .16 .05 .02 (.12)
<CAPTION>
At November 30,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA
Total assets............................................ $ 40,441 $ 40,082 $ 35,142 $ 70,895 $ 77,183
Total debt(2)........................................... - - - 39,500 45,000
Shareholders' equity.................................... 38,654 38,221 32,850 28,086 27,013
</TABLE>
(1) As a result of the sale of Calton Homes, Inc. that occurred on December
31, 1998, the financial statements presentation treats the Company's
homebuilding business and results as discontinued operations in
accordance with APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a
Business." The Company recognized a gain of $4,418,000 which is net of
a provision in lieu of taxes of $3,173,000 on the sale.
(2) Debt is included as part of discontinued operations subsequent to June
1997 since Calton Homes, Inc. became the primary obligor and borrower
of a revolving credit agreement entered into at that time.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF SALE OF CALTON HOMES, INC.
OPERATIONS
On December 31, 1998, the Company completed the sale of Calton
Homes, Inc., its primary operating homebuilding subsidiary to
Centex Real Estate Corporation ("Centex" or the "purchaser"). The
shareholders of Calton, Inc. approved the sale of the stock of
Calton Homes on December 30, 1998. The purchase price for the stock
of Calton Homes was $48.1 million, which resulted in a pretax gain
of approximately $7.6 million and was subject to a $5.2 million
holdback (see Commitments and Contingencies). Cash proceeds from
the sale through November 30, 1999 were approximately $43.4
million, net of the remaining holdback of $4.0 million and
including other closing adjustments. No tax liability is expected
to result from the sale. However, a provision in lieu of taxes was
recorded for financial reporting purposes in the amount of $3.2
million related to the sale. Calton has entered into an agreement
to provide consulting services to Centex that requires payments to
the Company of $1.3 million per year over a three-year period.
The sale of Calton Homes was completed as part of the
Company's overall strategy to enhance shareholder value. Since the
completion of the sale, the Company has been primarily engaged in
providing consulting services to the purchaser of Calton Homes and
analyzing potential business and acquisition opportunities. In July
1999, the Company acquired substantially all of the assets of iAW,
Inc., an Internet business solutions provider in its early stages
of development that assists companies in defining an effective
Internet business strategy and implementing the components of that
strategy. The Company conducts this business through its wholly
owned subsidiary, eCalton. In January 2000, the Company acquired a
collective direct and indirect (through ownership in a parent
company) 50.4% interest in PrivilegeONE, a newly formed company
engaged in the development of a co-branded loyalty credit card
program. The Company continues to actively analyze other
opportunities to deploy the funds generated by the sale of Calton
Homes.
As part of the Company's strategic plan to enhance shareholder
value, the Company implemented a significant stock repurchase
program, pursuant to which it announced its intention to repurchase
up to 10 million shares of common stock in open market repurchases
and privately-negotiated transactions. Approximately 6.9 million
shares of Common Stock have been repurchased by the Company since
October 31, 1998 at an average price of $1.26 per share.
The following discussion included in the Results of Operations
are based on the continuing operations of Calton, Inc. The
financial statements present the Company's homebuilding business as
discontinued operations in accordance with APB Opinion No. 30,
"Reporting the Effects of Disposal of a Segment of a Business."
RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 1999
AND 1998
Income from continuing operations before taxes was $1.1
million for the year ended November 30, 1999 compared to a loss of
$2.0 million for the year ended November 30, 1998. Revenues of $3.2
million during fiscal 1999 were primarily derived from the
consulting agreement with the purchaser of Calton Homes and
interest earned on cash derived from the sale. Also included in
revenues for 1999 was $157,000 for eCalton. There were no
comparable revenues for fiscal 1998.
Selling, general and administrative expenses included in
continuing operations were $2.0 million during both fiscal 1999 and
1998. General and administrative expenses have decreased
approximately $500,000 at the corporate level. The decrease is
attributable to a significant reduction in corporate fixed costs
related to the sale of Calton Homes, including personnel
reductions, leasing costs and other overhead items. However, the
reductions were offset with the expenditures of eCalton as part of
the strategy to ramp up its operations during 1999 and 2000.
12
<PAGE>
As a result of the circumstances described above, the Company
recognized Income from continuing operations, net of taxes of
$661,000 for fiscal 1999 as compared to a loss of $2.0 for fiscal
1998. Included in the 1999 results is a pretax loss of $427,000
from eCalton, $256,000 net of taxes.
Loss from discontinued operations was $613,000, $240,000 net
of a $373,000 tax benefit for the year ended November 30, 1999. The
loss includes approximately $1.0 million related to legal costs and
the resolution of certain litigation matters in excess of amounts
previously reserved by management related to the Company's former
homebuilding business. As a condition to the sale of Calton Homes,
the Company is required to indemnify the purchaser for certain
specified litigation pending against Calton Homes. There is no
assurance that the ultimate resolution of the pending litigation
will not result in additional charges. Partially offsetting the
loss is pre-tax income of $429,000 from one month of operations of
Calton Homes and a commercial land sale. In addition, included in
the tax provision for discontinued operations is a tax benefit
related to the reduction of a state tax reserve in the amount of
$550,000 due to the resolution of certain state tax issues.
Income from discontinued operations for the year ended
November 30, 1998 was $6.3 million, net of a tax provision of $2.4
million. The results primarily include the operations of Calton
Homes.
Taxes for the year ended November 30, 1999 reflect a provision
for income taxes of $3.2 million resulting in an effective rate of
thirty-nine and one- half percent (39.5%). The increase in the
effective tax rate from thirty-four percent (34%) for the year
ended November 30, 1998 was primarily due to the future tax
benefits recognized in 1998 which were significantly higher than
those recognized in 1999, coupled with a significantly larger
amount of 1999 expenses for which the Company will not receive any
tax benefit. In 1998 a provision for income taxes of $2.2 million
was recorded. The net operating loss carryforwards and certain
other deferred tax assets are subject to utilization limitations as
a result of the changes in the control of the Company that occurred
in 1993 and 1995. The Company's ability to use the net operating
loss ("NOL") to offset future income is $1.1 million per year for
14 years. This amount has been reduced from 1998 by $500,000 per
year as a result of the sale of Calton Homes (see note 5).
The effective rate from continuing operations for the years
ended November 30, 1999 and 1998 is based upon a provision of
$453,000 and a benefit of $125,000, respectively. The effective
rate for 1998 is influenced by the tax expense associated with
intercompany charges from continuing operations to discontinued
operations.
As of November 30, 1999 the Company recorded a $518,000
unrealized loss on marketable equity securities in comprehensive
income.
RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997
For the year ended November 30, 1998 the Company reported a
net loss of $2.0 million from continuing operations as compared to
$1.9 million for the year ended November 30, 1997. As previously
stated, the Company's primary business was homebuilding and with
the sale of Calton Homes, Inc., those financial results are treated
as discontinued operations. Without revenues in both 1998 and 1997,
the loss was primarily attributable to general and administrative
costs of $2.0 million and $2.4 million for the years ended November
30, 1998 and 1997, respectively. General and administrative costs
were substantially comprised of salaries, benefits, insurance ,
rent, and professional services.
Other income for 1997 is comprised of $571,000 of interest
income received related to a tax refund which was recorded as an
increase to paid in capital since the refund related to events
occurring prior to the Company's 1993 restructuring and $525,000
representing the final payments received on a note previously
reserved.
The effective tax rate for continuing operations for the years
ended November 30, 1998 and 1997 is based upon a benefit of
$125,000 and a provision of $560,000, respectively. The effective
rate for both years is influenced by the tax expense associated
with intercompany charges from continuing operations to
discontinued operations. The effective rate from continuing
operations for 1997 was influenced by the tax expense associated
with other income.
Taxes for the year ended November 30, 1998 reflect a provision
for income taxes of $2.2 million resulting in an effective rate of
thirty-four percent (34%). The reduction in the effective tax rate
from sixty-five
13
<PAGE>
percent (65%) for the year ended November 30, 1997 was primarily
due to realization of future tax benefits of approximately
$603,000, which increased the total tax benefit to $705,000, of
which $649,000 relates to the sale of Calton Homes. In 1997 a
provision for income taxes of $209,000 was recorded.
Income from discontinued operations was $6.3 million for the
year ended November 30, 1998 as compared to $1.6 million for the
prior year. The Company's former homebuilding operations benefited
from improved economic conditions in New Jersey. Revenues and gross
profit for fiscal 1998 were $105.3 million and $19.4 million as
compared to $126.6 million and $16.2 million, respectively for
fiscal 1997.
The Company's objectives during 1998 and 1997 were to reduce
debt and related interest costs, and to increase shareholders'
equity. The Company's weighted average debt outstanding under its
revolving credit facility amounted to $25.0 million for the year
ended November 30, 1998 compared to $40.2 million for the year
ended November 30, 1997. The decrease is attributable to the
improved operating and financial performance of Calton Homes, and
the sale of the Florida division's assets of approximately $16.7
million in November 1997, a substantial portion of which was
utilized to reduce the amount outstanding under the Company's
credit facility.
In June 1997, the Company entered into a new, secured
revolving credit facility with BankBoston, N.A. Proceeds from the
new facility were used to retire the prior revolving credit
facility of $42.0 million which was paid off for $39.4 million.
Based on the accounting principals in effect at the time of the
extinguishment of debt, the Company recorded an extraordinary gain
of approximately $1.3 million, after deducting an $842,000
provision in lieu of income taxes. Included in the gain was the
write off of deferred costs and out-of-pocket costs of
approximately $550,000.
LIQUIDITY On December 31, 1998 the sale of Calton Homes liquidated a
AND substantial part of the Company and resulted in the payoff, by the
CAPITAL purchaser, of the Company's revolving credit facility with
RESOURCES BankBoston which had an outstanding balance of $19.5 million. The
sale generated approximately $43.4 million of cash including the
receipt of an additional $1.8 million related to the post closing
adjustments that were finalized in September 1999. In addition, a
$5.2 million holdback was established at closing as part of the
sale as a condition to indemnify the purchaser against existing
litigation and other warranties. As part of a post-closing
settlement agreement, $700,000 was refunded to the purchaser in the
fourth quarter of 1999, which was paid out of the General
Indemnification Funds. The Company collected $592,000 out of the
Specific Indemnification Funds during 1999 as a result of certain
litigation settlements, and legal fee reimbursements (see Note 6).
At November 30, 1999 there was $2.4 million in the General
Indemnification Funds and $1.6 million in the Specific
Indemnification Funds. During the first quarter of 2000, $1.0
million was collected out of the General Indemnification Funds
and indemnity claims totaling approximately $253,000 have been
made by the purchaser. The Company and the purchaser are
attempting to resolve these claims and it is uncertain as to
whether these claims will proceed to arbitration in accordance
with the terms of the indemnification agreement. However, the
Company believes it has meritorious defenses against this claim.
The remaining General Indemnification Funds will be disbursed to
the Company, subject to claims for indemnification, on December
31, 2000. The Specific Indemnification Funds will be disbursed,
to the extent not otherwise utilized in the resolution of
litigation, on a case by case basis as the litigation is
resolved. If all of the specified litigation is not resolved by
December 31, 2000, a portion of the General Indemnification Funds
will not be disbursed to the Company until the resolution of the
litigation. The Company may, under certain circumstances, be
required to deposit additional funds in the holdback if all of
the specified litigation is not resolved by December 31, 2000.
Future decreases to the escrows held for indemnifications, if any
will be recorded as an adjustment to the Income from sale of
Calton Homes.
As of November 30, 1999 the Company had $33.8 million of
highly liquid money market funds with its underlying investments
comprised of investment-grade, short-term corporate issues and
commercial paper yielding approximately 5.0%. Also at November 30,
1999 the Company had invested approximately $1.9 million in
marketable equity securities with an unrealized loss of $518,000.
In July 1999, the Company acquired substantially all of the
assets of iAW, Inc., an Internet business solutions provider. The
purchase price for the acquisition was $250,000. The Company
conducts the acquired business through its wholly owned subsidiary,
eCalton.
14
<PAGE>
In January 2000, the Company acquired a collective direct and
indirect (through ownership in a parent company) 50.4% equity
interest in PrivilegeONE Networks, a newly formed company engaged
in the development of a co-branded loyalty credit card program. The
purchase price for the Company's interest was comprised of $105,000
of cash and a warrant to acquire 1,200,000 shares of Common Stock
at an exercise price of $2.50 per share. The warrant becomes
exercisable only if PrivilegeONE surpasses certain specified
earning targets. In addition to its equity interest, the Company
has agreed to loan up to $1,500,000 to PrivilegeONE pursuant to a
note which bears interest at the rate of 10% per annum and becomes
due in January 2004.
The Company believes that current cash on hand, additional
funds generated by the sale of Calton Homes as a result of the
collection of the holdback receivable, income tax payment
reductions derived from NOL utilization, and funds provided under
the three-year consulting agreement with the purchaser of Calton
Homes which provides for payments of $1.3 million per year, will
provide sufficient capital to support the Company's operations. As
of November 30, 1999 the Company had repurchased an aggregate of
6.9 million shares for $8.7 million, an average price of $1.26 per
share. Management has suspended the acquisition of additional
shares subsequent to year end since the market value of the
Company's common stock has been trading in excess of book value.
Although the Company is currently analyzing potential business
opportunities consistent with its strategic plan; it has not
determined the specific application for the remaining proceeds of
the sale of Calton Homes. If over the period that commenced on
December 30, 1998 and continues for 18 months thereafter, the
Company has not redeployed a substantial portion of the sale
proceeds of Calton Homes, or developed a plan to redeploy a
substantial portion of the proceeds within a reasonable timeframe,
the Company, subject to shareholder approval, will be liquidated
and proceeds distributed to its shareholders. However, the Company
continues to actively analyze other opportunities to redeploy the
funds.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from operating activities generated approximately
$1.0 million during 1999 that includes $1.7 million of interest
earned on highly liquid money market funds, and approximately $1.0
million from the consulting agreement with the purchaser of Calton
Homes. Partially offsetting the increases are cash utilized for
general and administrative costs and the funding of eCalton's
operations as it proceeds in the initial stages of business.
Cash flow from discontinued operations during fiscal 1999
primarily consisted of the payment of legal settlements and
litigation costs related to the indemnification obligations arising
from the sale of Calton Homes in the amount of $1.5 million.
Offsetting the uses of cash are the collection of a mortgage
payable in the amount of $442,000 and the sale of a commercial land
parcel of $240,000, among other items.
CASH FLOWS FROM INVESTING ACTIVITIES
The Company generated approximately $43.4 million of cash in
fiscal 1999 from the sale of Calton Homes including the receipt of
an additional $1.8 million as part of the post-closing settlement.
As a part of the post-closing agreement, the Company refunded to
the purchaser $700,000 in September 1999, paid out of the General
Indemnification Funds that were deposited in escrow and classified
as Holdback receivable. In addition, the Company collected $592,000
of the holdback established to secure the Company's indemnity
obligations to the purchaser.
In July 1999, the Company acquired the assets of iAW, Inc., an
Internet business solutions provider. The purchase price for the
acquisition was $250,000.
The Company purchased marketable equity securities for an
aggregate amount of $4.0 million in fiscal 1999, of which $1.9
million was outstanding as of November 30, 1999. These securities
were subsequently sold during the first quarter of 2000 resulting
in the receipt of $1.3 million.
15
<PAGE>
The Company loaned $250,000 to an entity in exchange for a
convertible note with a warrant attached. The note has been
subsequently converted to 142,851 common shares of CorVu
Corporation (symbol-"CRVU") under the terms of the loan when the
borrower became a publicly held company through a reverse merger.
As consideration for making the loan, the Company obtained a
warrant that permits the purchase of 253,125 shares at a per share
price of $.01 per share. The fair value of the warrant is $16,000
based upon the allocation of the relative fair values of the
convertible note and warrant at the time of issuance. The market
price for CorVu common stock was $6.25 per share as of February 9,
2000; however, both the stock and the stock under the warrants are
unregistered securities and therefore are not freely tradable. In
addition, the Company loaned $103,000 to PrivilegeONE pursuant to
the acquisition that occurred in January 2000 (see Note 9,
Subsequent Events).
CASH FLOWS FROM FINANCING ACTIVITIES
For the year ended November 30, 1999 the Company repurchased
6.9 million shares of its Common Stock on the open market and in
privately negotiated transactions for an aggregate price of $8.6
million, an average of $1.26 per share. These repurchases were
consistent with the Company's repurchase program to repurchase up
to 10.0 million shares of its Common Stock. The stock repurchase
program has been temporarily suspended as a result of increases in
the trading price during the first quarter of 2000 as compared to
the book value per share. In June 1999, the holder of a warrant
(the "Warrant") to purchase 1,000,000 shares of Calton Common Stock
exercised its right under the Warrant using the cashless exercise
method. As a result, the holder was issued 681,000 shares which the
Company repurchased for $750,000 that is included in the aggregate
numbers above. As a result, the Warrant was cancelled.
YEAR 2000
The Company implemented a plan to address the Company's
exposure to the Year 2000 issues and has not experienced any
material adverse consequences as a result of the impact of Year
2000 issues on its computer based systems and applications, or the
computer based systems of its vendors. The Year 2000 issue is the
result of computer programs written using two digits rather than
four to define the applicable year. Computer systems that have time
sensitive software may recognize the date "00" as the year 1900
rather than 2000. This could result in a major system failure or
miscalculations. Pursuant to its plan, the Company has completed
the process of upgrading its personal computers and the conversion
of its information technology system to a new system that is Year
2000 compliant. The Company does not believe that it faces any
significant risk relating to non-information technology systems.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company currently has no outstanding indebtedness other
than accounts payable. As a result, the Company's exposure to
market rate risk relating to interest rate is not material. The
Company's funds are primarily invested in highly liquid money
market funds with its underlying investments comprised of
investment-grade, short-term corporate issues and commercial paper
currently yielding approximately 5.0%. The Company does not believe
that it is currently exposed to market risk relating to foreign
currency exchange risk or commodity price risk. However, a
substantial part of the Company's cash equivalents are not FDIC
insured or bank guaranteed. As of November 30, 1999 the Company had
approximately $1,857,000 in marketable equity securities. As a
result, the Company had exposure to market risks associated with
declines in trading prices of these securities. As of November 30,
1999, the Company recorded a $518,000 unrealized loss on the
securities in comprehensive income. These securities were
subsequently sold at a $508,000 loss in the first quarter of fiscal
2000 that will impact earnings for the quarter ending February 29,
2000.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data are set forth
herein commencing on page F-1 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by item 10 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(a) 1. and 2. Financial statements and financial statement schedules F-1
Reference is made to the Index of Financial Statements and
Financial Statements Schedules hereinafter contained
3. Exhibits E-1
Reference is made to the Index of Exhibits hereinafter
contained
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
November 30, 1999.
</TABLE>
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the underwriter, thereunto duly authorized.
CALTON, INC.
--------------------------------
(Registrant)
Dated: February 29, 2000 By: /s/ David J. Coppola
--------------------------------
David J. Coppola, Vice President
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the underwriter, thereunto duly authorized.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. Caldarone Chairman, Chief Executive February 29, 2000
- --------------------------- Officer and President
Anthony J. Caldarone (Principal Executive Officer)
/s/ David J. Coppola Vice President February 29, 2000
- --------------------------- (Principal Financial &
David J. Coppola Accounting Officer)
/s/ Anthony J. Caldarone Director February 29, 2000
- ---------------------------
Anthony J. Caldarone
/s/ J. Ernest Brophy Director February 29, 2000
- ---------------------------
J. Ernest Brophy
/s/ Mark N. Fessel Director February 29, 2000
- ---------------------------
Mark N. Fessel
/s/ Kenneth D. Hill Director February 29, 2000
- ---------------------------
Kenneth D. Hill
/s/ Robert E. Naughton Director February 29, 2000
- ---------------------------
Robert E. Naughton
/s/ Frank Cavell Smith, Jr. Director February 29, 2000
- ---------------------------
Frank Cavell Smith, Jr.
</TABLE>
19
<PAGE>
CALTON, INC. AND SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants F-2
Consolidated Balance Sheets as of November 30, 1999 and 1998 F-3
Consolidated Statements of Operations for the Years Ended November 30, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the Years Ended November 30, 1999, 1998 and 1997 F-5
Consolidated Statements of Shareholders' Equity for the Years Ended November 30, 1999, 1998 and F-6
1997
Notes to Consolidated Financial Statements F-7
Consent of Independent Accountants F-18
Schedules
II-Valuation and Qualifying Accounts F-19
</TABLE>
- -------------------------------
** Schedules other than the schedule listed above have been omitted because of
the absence of the condition under which they are required or because the
required information is presented in the financial statements or the note
thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of Calton, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page F-1 present fairly, in all material
respects, the financial position of Calton, Inc. and its subsidiaries at
November 30, 1999 and November 30, 1998, and the results of their operations and
their cash flows for each of the three years in the period ended November 30,
1999 in conformity with accounting principles generally accepted in the United
States. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 14(a)(2) on page F-1 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers, LLP
Florham Park, New Jersey
January 12, 2000, except for the information presenting in Note 9, which is as
of February 18, 2000
F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents...................................................... $ 33,786,000 $ 85,000
Securities available for sale.................................................. 1,339,000 -
Holdback receivable............................................................ 1,205,000 -
Receivables.................................................................... 337,000 61,000
Prepaid expenses and other assets ............................................. 202,000 939,000
------------ ------------
Total current assets....................................................... 36,869,000 1,085,000
Holdback receivable............................................................ 2,842,000 -
Notes receivable.............................................................. 338,000 -
Goodwill, net.................................................................. 233,000 -
Fixed assets, net.............................................................. 143,000 31,000
Warrant........................................................................ 16,000 -
Net assets of discontinued operations.......................................... - 38,851,000
------------ ------------
Total assets .............................................................. $ 40,441,000 $ 39,967,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities.......................... $ 1,350,000 $ 1,746,000
Net liabilities of discontinued operations ....................................... 437,000 -
------------ ------------
Total liabilities ......................................................... 1,787,000 1,746,000
------------ ------------
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 53,700,000 shares authorized; issued and
outstanding 21,473,000 in 1999 and 26,635,000 in 1998 ...................... 283,000 267,000
Paid in capital ................................................................ 32,636,000 27,957,000
Retained earnings............................................................... 14,951,000 10,112,000
Less cost of shares held in treasury............................................ (8,698,000) (115,000)
Accumulated other comprehensive loss:
Unrealized loss in securities available for sale........................... (518,000) -
------------ ------------
Total shareholders' equity ................................................ 38,654,000 38,221,000
------------ ------------
Total liabilities and shareholders' equity ................................ $ 40,441,000 $ 39,967,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended November 30,
-----------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues ............................................................ $ 3,196,000 $ - $ -
------------ ------------ ------------
Costs and expenses
Cost of revenues............................................ 116,000 - -
Selling, general and administrative......................... 1,966,000 2,029,000 2,396,000
------------ ------------ ------------
2,082,000 2,029,000 2,396,000
------------ ------------ ------------
Income (loss) from operations........................................ 1,114,000 (2,029,000) (2,396,000)
Other charges (credits)
Interest expense, net........................................ - 56,000 41,000
Other income................................................. - - (1,096,000)
------------ ------------ ------------
Income (loss) from continuing operations before income taxes,
discontinued operations and extraordinary gain............. 1,114,000 (2,085,000) (1,341,000)
Provision (benefit) for income taxes................................. 453,000 (125,000) 560,000
------------ ------------ ------------
Income (loss) from continuing operations............................. 661,000 (1,960,000) (1,901,000)
Income (loss) from discontinued operations, net of a provision
(benefit) for incomes taxes of ($373,000), $2,363,000
and ($597,000) respectively.................................. (240,000) 6,315,000 1,646,000
Income from sale of Calton Homes, Inc. in 1999 and Florida
sale transaction in 1997, net of a provision in lieu of
income taxes of $3,173,000 and $246,000, respectively........ 4,418,000 - 369,000
Extraordinary gain from extinguishment of debt, net of an
$842,000 provision in lieu of income taxes................... - - 1,263,000
------------ ------------ ------------
Net income........................................................... $ 4,839,000 $ 4,355,000 $ 1,377,000
============ ============ ============
Earnings per share
Basic:
Income (loss) from continuing operations..................... $ .03 $ (.07) $ (.07)
Income (loss) from discontinued operations, net.............. (.01) .23 .06
Income from sale of operating businesses, net................ .19 - .01
Extraordinary gain, net...................................... - - .05
------------ ------------ ------------
Net income................................................... $ .21 $ .16 $ .05
============ ============ ============
Diluted:
Income (loss) from continuing operations..................... $ .03 $ (.07) $ (.07)
Income (loss) from discontinued operations, net.............. (.01) .23 .06
Income from sale of operating businesses, net................ .18 - .01
Extraordinary gain, net...................................... - - .05
------------ ------------ ------------
Net income................................................... $ .20 $ .16 $ .05
============ ============ ============
Weighted average number of shares outstanding
Basic........................................................ 22,769,000 26,685,000 26,567,000
============ ============ ============
Diluted...................................................... 23,992,000 26,685,000 26,567,000
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Years Ended November 30,
--------------------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................ $ 4,839,000 $ 4,355,000 $ 1,377,000
Adjustments to reconcile net income to net cash
used by operating activities
Income from the sale of Calton Homes, Inc............ (4,418,000) - -
Income (loss) from discontinued operations........... 240,000 (6,315,000) (2,015,000)
Extraordinary gain from extinguishment of debt, net.. - - (1,263,000)
Provision for income taxes........................... 422,000 - -
Depreciation and amortization........................ 17,000 164,000 173,000
Amortization of debt financing fees.................. - - 103,000
Change in net assets/liabilities of discontinued
operations...................................... (657,000) 3,232,000 32,694,000
Increase in receivables.............................. (276,000) - -
Tax refund........................................... - - 1,871,000
Decrease (increase) in prepaid expenses
and other assets................................ 737,000 (895,000) 697,000
Increase (decrease) in accounts payable, accrued
expenses and other liabilities.................. 77,000 (431,000) (1,042,000)
Issuance of stock under 401(k) Plan and other........ - 91,000 41,000
------------ ------------ -------------
981,000 201,000 32,636,000
------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of Calton Homes, Inc.................... 43,440,000 - -
Purchase of securities available for sale...................... (3,984,000) - -
Sale of securities available for sale.......................... 2,127,000 - -
Increase in notes receivable................................... (338,000) - -
Acquisition of business........................................ (250,000) - -
Increase in property and equipment............................. (58,000) (18,000) (16,000)
Purchase of warrant............................................ (16,000) - -
------------ ------------- --------------
40,921,000 (18,000) (16,000)
------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock repurchase............................................... (8,583,000) (115,000) -
Stock options exercised........................................ 382,000 - -
Retirement of revolving credit agreement....................... - - (39,350,000)
Proceeds under revolving credit agreement...................... - - 2,500,000
------------ ------------ -------------
(8,201,000) (115,000) (36,850,000)
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents.............. 33,701,000 68,000 (4,230,000)
Cash and cash equivalents at beginning of year.................... 85,000 17,000 4,247,000
------------ ------------ -------------
Cash and cash equivalents at end of year.......................... $ 33,786,000 $ 85,000 $ 17,000
============ ============ =============
Noncash transactions:
Holdback receivable............................................ $ 4,047,000 $ - $ -
Acquisition of assets.......................................... $ 54,000 $ - $ -
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(amounts in thousands)
Total Accumulated
Shareholders' Other Compre-
Equity Common Paid In Retained Treasury Compre- hensive
Capital Stock Capital Earnings Stock hensive Loss Earnings
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Balance,
<S> <C> <C> <C> <C> <C> <C> <C>
November 30, 1996............ $ 28,086 $ 265 $ 23,441 $ 4,380 $ - $ - $ -
Net income.................... 1,377 - - 1,377 - - -
Issuance of stock under
401(k) Plan.............. 31 1 30 - - - -
Provision in lieu of
income taxes............ 1,265 - 1,265 - - - -
Tax refund.................... 1,871 - 1,871 - - - -
Issuance of stock
warrants................. 210 - 210 - - - -
Shares issued under
stock option plan
and other................ 10 - 10 - - - -
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Balance,
November 30, 1997............. 32,850 266 26,827 5,757 - - -
Net income.................... 4,355 - - 4,355 - - -
Issuance of stock under
401(k) Plan ............. 71 1 70 - - - -
Provision in lieu of
income taxes............. 1,040 - 1,040 - - - -
Shares issued under
stock options plan
and other................ 20 - 20 - - - -
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Subtotal................. 38,336 267 27,957 10,112 - - -
Less: Purchase of
treasury stock........... (115) - - - (115) - -
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Balance,
November 30, 1998............. 38,221 267 27,957 10,112 (115) - -
Net income.................... 4,839 - - 4,839 - - 4,839
Issuance of stock under
stock option plans...... 382 9 373 - - - -
Issuance of stock under
warrant exercise........ - 7 (7) - - - -
Modification of stock - -
option terms............. 525 - 525 - - - -
Provision in lieu of
income taxes............. 3,788 - 3,788 - - - -
Less: purchase of
treasury stock........... (8,583) - - - (8,583) - -
Comprehensive Loss:
unrealized loss in
securities available
for sale................. (518) - - - - (518) (518)
-----------
Comprehensive
earnings................. - - - - - - $ 4,321
-------------- ----------- ----------- ----------- ---------- ------------ ===========
Balance,
November 30, 1999............. $ 38,654 $ 283 $ 32,636 $ 14,951 $ (8,698) $ (518)
============== =========== =========== =========== ========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF PRINCIPLES OF CONSOLIDATION
SIGNIFICANT
ACCOUNTING The consolidated financial statements include the accounts
POLICIES of Calton, Inc. and all of its wholly-owned and majority owned
subsidiaries (the "Company"). On December 31, 1998, the Company
completed the sale of Calton Homes to Centex Real Estate
Corporation ("Centex" or the "purchaser"), and on November 30,
1997, the Company sold the Orlando, Florida homebuilding assets
(see Note 7).
As a result of the sale of Calton Homes and the Florida
homebuilding assets, the financial statements treat the Company's
former homebuilding business and results as discontinued
operations in accordance with APB Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business."
Certain reclassifications have been made to prior years'
financial statements in order to conform with the 1999
presentation. All significant intercompany accounts and
transactions have been eliminated.
ACQUISITION AND NEW BUSINESS SEGMENT
In July 1999 the Company acquired the assets of iAW, Inc.,
an Internet business solutions provider. The acquired business is
operated through a wholly owned subsidiary named eCalton.com,
Inc. ("eCalton"). As a result of this acquisition, the Company
has recorded Goodwill in the amount of $237,000 that will be
amortized over a ten-year period.
REVENUE RECOGNITION
Revenues of eCalton are derived from fixed fee arrangements
and are recognized under the percentage of completion method of
accounting based on the ratio of costs incurred compared to
estimated costs. Provision for estimated losses on uncompleted
contracts are made in circumstances in which such losses are
probable.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid
investments, with original maturities of three months or less,
that are readily convertible into cash.
FIXED ASSETS
Fixed assets primarily comprise of computer equipment and
office furniture. Computer equipment is being depreciated over a
useful life of three to four years and office furniture is being
depreciated over five years. Accumulated depreciation as of
November 30, 1999 is $12,000.
INCOME TAXES
Income taxes are determined in accordance with Statement of
Financial Accounting Standards No. 109 (see Note 5).
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses consist primarily of prepaid insurance that
will be amortized over the contract period.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
PER SHARE COMPUTATIONS
Statements of Financial Accounting Standards No. 128,
"Earnings per Share" requires the presentation of basic and
diluted per share amounts, effective for financial statements
issued for periods ending after December 15, 1997. The weighted
average number of common stock outstanding for 1999, 1998 and
1997 used for the basic calculation is 22,769,000, 26,685,000 and
26,567,000 respectively. The diluted weighted average number of
shares of common stock for the same periods is 23,992,000,
26,685,000 and 26,567,000 respectively.
As of November 30, 1999, there were 21,473,000 shares
outstanding and a total of 3,661,000 stock options granted and
outstanding under the Company's incentive stock option plans.
There were 1,800,000 stock options that were not included in the
calculation of diluted earnings per share in 1999 as these
options were antidilutive. In addition, a warrant to purchase
1,000,000 shares of common stock was outstanding until June 1999
(see Note 4). The effect of stock options and the warrant were
not included in the calculation of diluted earning per share in
1998
F-7
<PAGE>
and 1997 as these options and warrants were antidilutive due to
the loss from continuing operations during these periods.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"),
establishes a fair value based method of accounting for
stock-based compensation plans, including stock options. FAS 123
allows the Company to continue accounting for stock options plans
under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), but requires it to provide
pro forma net income and earnings per share information "as if"
the new fair value approach had been adopted. Because the Company
continued to account for its stock option plans under APB 25,
there was no impact on the Company's consolidated financial
statements resulting from implementation of FAS 123 (see Note 4).
2. NOTES
RECEIVABLE NOTES RECEIVABLE CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
November 30,
------------------------
1999 1998
--------- -----------
<S> <C> <C>
CorVu note receivable (a)................ $ 234,000 $ -
PrivilegeONE note receivable (b)......... 104,000 -
--------- -----------
$ 338,000 $ -
========= -----------
</TABLE>
(a) In November 1999, the Company made a $250,000 unsecured
bridge loan to CorVu Corporation ("CorVu") pursuant to a note
which provided that all principal and accrued interest would
become due upon the earlier of (i) 120 days or (ii) the closing
of a reverse merger transaction with Minnesota American, Inc.
Upon the occurrence of the reverse merger in January 2000, the
bridge loan was converted to 143,000 common shares in the
surviving corporation.
As consideration for making the bridge loan, the Company was
issued a five year warrant to purchase 253,000 shares of common
stock in CorVu at a per share price of $.01 per share. The fair
value of the notes and warrant were determined and allocated to
each instrument based on their relative fair value.
At the time of the reverse merger, Minnesota American
changed its name to CorVu and is traded under the symbol
("CRVU".) The trading price for CorVu common stock was $6.25 per
share as of February 9, 2000; however, both the common shares and
the shares under the warrant are unregistered securities and
therefore are not freely tradable (see Note 9).
(b) November 1999, the Company loaned an aggregate of
$104,000 to PrivilegeONE to fund its initial operations pursuant
to a note providing for interest at a rate of ten percent per
annum and a maturity date of February 19, 2000. During the first
quarter of fiscal 2000, the Company acquired a 50.4% direct and
indirect ownership interest in PrivilegeONE. Concurrently, the
note was converted to a new note bearing interest at 10% per
annum, with a maturity date of January, 2004 (see Note 9).
F-8
<PAGE>
3. SEGMENT Through the acquisition of substantially all the assets of
REPORTING iAW, Inc., an Internet business solutions provider, in July 1999,
the Company has entered into a new business and related industry.
The acquired business is operated through a wholly owned
subsidiary, eCalton. Revenues of eCalton will be recognized under
the percentage of completion method of accounting. The Company
does not have any foreign operations. The following schedule
illustrates eCalton relative to the consolidated Company for the
year ended November 30, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
CORPORATE
INTERNET AND
BUSINESS CONSULTING TOTAL
SOLUTIONS SERVICES COMPANY
----------- ----------- ----------
<S> <C> <C> <C>
Total revenues (a) ......................... $ 157 $ 3,039 $ 3,196
Total cost of revenue (b) .................. 116 - 116
Total selling, general and administrative
expenses ............................. 468 1,498 1,966
Income (loss) from operations .............. (427) 1,541 1,114
Provision (benefit) for income taxes........ (171) 624 453
Income (loss) from continuing
operations............................ (256) 917 661
Total assets ............................... $ 464 $ 39,977 $ 40,441
</TABLE>
(a) Total revenues for Internet Business Solutions
represents five months of revenues since acquisition
on July 1, 1999.
(b) Total cost of revenues represents production costs
(including allocated salaries, computer hardware,
computer software and video conferencing costs).
4. SHAREHOLDERS' The Company's Certificate of Incorporation provides for
EQUITY 53,700,000 authorized shares of Common Stock (par value $.01 per
share), 2,600,000 shares of Redeemable Convertible Preferred
Stock (par value $.10 per share) and 10,000,000 shares of Class A
Preferred Stock (par value $.10 per share), one million shares of
which have been designated as Class A Series One Preferred Stock.
None of the Preferred Stock is issued or outstanding.
The Company commenced a significant stock repurchase program
pursuant to which it announced its intention to repurchase up to
10,000,000 shares of Common Stock in open market repurchases and
privately-negotiated transactions during fiscal 1999 and 1998. As
of November 30, 1999, there were 6,900,000 shares held in
Treasury in the amount of $8,698,000. The Company has suspended
the acquisition of additional shares subsequent to year end since
the market value of the Company's Common Stock has been in excess
of book value.
In May 1993, the Company adopted the Calton, Inc. 1993
Non-Qualified Stock Option Plan (the "1993 Plan") under which a
total of 1,493,000 shares of Common Stock were reserved for
issuance. Under the terms of the 1993 Plan, options may be
granted at an exercise price designated by the Board of
Directors. In January 1999, the Company's Board of Directors
approved the grant to the Company's Chairman and President of
options to acquire an aggregate of 600,000 shares of Common Stock
under the 1993 Plan. The options granted under the 1993 Plan vest
in equal installments over a three-year period. The exercise
price of options granted range from $.31 to $1.22 per share.
Options granted under the 1993 Plan have a maximum term of ten
years, with a weighted average contractual life of 6.5 years in
1999 and 2.3 years in 1998. In the fourth quarter of 1998,
685,000 options were repurchased from a former employee for
$171,000 or $.25 per option.
F-9
<PAGE>
In April 1996, the Company's shareholders approved the
Company's 1996 Equity Incentive Plan (the "1996 Plan") under
which a total of 2,000,000 shares of Common Stock were reserved
for issuance. Under the terms of the 1996 Plan, options may be
granted at an exercise price equal to the fair market value of
the Common Stock on the date of grant (110% of such fair market
value in the case of an incentive stock option granted to a 10%
shareholder). In January 1999, the Board approved the grant to
other employees of options to acquire an aggregate of 35,000
shares of Common Stock under the 1996 Plan. The options granted
under the 1996 Plan vest in equal installments over a five-year
period. The exercise prices of outstanding options range from
$.34 to $1.22 per share with vesting ranging from one to five
years. The exercise period in up to ten years, with a weighted
average contractual life of 4.7 years in 1999 and 4.1 years in
1998.
In connection with the sale of Calton Homes, Inc. the
Company made certain adjustments to the terms of options to
acquire Calton Common Stock previously granted and outstanding as
of December 31, 1998 under the 1993 Plan and the 1996 Plan.
Effective January 1, 1999, all options that were previously
granted and outstanding became exercisable, regardless of whether
the right to exercise the option had previously vested; employees
of Calton Homes, Inc. have until December 31, 2000 to exercise
any options; and options of employees of Calton, Inc. will expire
in accordance with their original terms. The effect of the
amendments to the stock option plans of approximately $525,000 is
considered to be severance costs and was therefore recorded as an
expense and included in the gain on the sale transaction in the
first quarter of 1999.
STOCK OPTION TRANSACTIONS UNDER THE 1996 PLAN AND 1993 PLAN ARE
SUMMARIZED AS FOLLOWS
(SHARES IN THOUSANDS):
<TABLE>
<CAPTION>
1996 1993
Plan Plan
----- -----
<S> <C> <C>
Options outstanding, November 30, 1997................................... 1,095 1,360
Granted.................................................................. 327 -
Forfeited or repurchased................................................. (36) (685)
Exercised................................................................ (4) -
----- -----
Options outstanding, November 30, 1998................................... 1,382 675
Granted.................................................................. 85 600
Exercised................................................................ (521) (360)
----- -----
Options outstanding, November 30, 1999................................... 946 915
----- -----
</TABLE>
In July 1999, the Company entered into employment agreements
with three officers of eCalton pursuant to which each have been
granted options to acquire 600,000 shares of Calton Common Stock,
or an aggregate of 1.8 million shares. The non-qualified stock
options granted have terms similar to the 1996 Equity Incentive
Plan, vest in three equal annual installments beginning July 19,
2000, and have a term of ten years. The exercise price is $1.63
per share.
The Company accounts for stock option plans under APB 25.
Accordingly, no compensation expense has been recognized for its
stock-based compensation plans except as discussed above and in
Note 7. Had compensation cost for the Company's stock option
plans been determined based upon the fair value at the grant date
for awards under these plans consistent with the methods
prescribed under FAS 123, the Company's net income would have
been reduced by approximately $551,000 and $141,000 for years
ended November 30, 1999 and 1998, respectively. On a pro forma
basis, earnings per share would have been reduced by $.02 and
$.00 per share for 1999 and 1998, respectively. The estimated
weighted average fair value of the options granted in each of the
two fiscal years ended November 30, 1999 and 1998 is $1.21 and
$.31, using the Black-Scholes option-pricing model, with the
following assumptions: dividend yield - none, volatility of .8
and .7, risk-free interest rate of 4.56% and 5.49%, assumed
forfeiture rate as they occur and an expected life of 3 years and
4.7 years at November 30, 1999 and 1998, respectively.
F-10
<PAGE>
In June 1999, the holder of a warrant (the "Warrant") to
purchase 1,000,000 shares of Calton Common Stock, exercised the
Warrant using the cashless exercise method. As a result, the
holder was issued 681,461 shares which the Company repurchased
for $750,000 and the Warrant was canceled. The 681,461 shares are
held as Treasury stock.
In January 2000, the Company's Board of Directors approved a
grant to the Company's Chairman and President of options to
acquire 200,000 shares of Common Stock under the 1996 Plan. These
options have an exercise price of $2.78 per share, a term of five
years and vest in five equal annual installments. In addition, in
January 2000, the Board approved the grant to other employees of
options to acquire an aggregate of 215,000 shares under the 1993
Plan and 136,000 shares under the 1996 Plan. Each of these
options has an exercise price of $2.53 per share. Options granted
under the 1993 Plan vest in equal annual installments over a
three year period. The options granted under the 1996 Plan vest
in equal installments over a five year period.
In February 1999, the Company's Board of Directors adopted a
shareholder rights plan (the "Rights Plan") and declared a
dividend of one preferred stock purchase right (a "Right") for
each outstanding share of Common Stock. Under the Rights Plan,
each Right represents the right to purchase from the Company one
one-hundredth (1/100th) of a share of Class A Preferred Stock
Series One (the "Preferred Stock") at a price of $5.50 per one
one-hundredth (1/100th) of a share. Each one one-hundredth
(1/100th) of a share of Preferred Stock has economic and voting
terms equivalent to those of one share of the Company's Common
Stock. The Rights will not become exercisable unless and until,
among other things, a person or group acquires or commences a
tender offer for 15% or more of the Company's outstanding Common
Stock. In the event that a person or group, without Board
approval acquires 15% or more of the outstanding Common Stock,
each Right would entitle its holder (other than the person or
group) to purchase shares of Preferred Stock having a value equal
to twice the exercise price. Also, if the Company is involved in
a merger or sells more than 50% of its assets or earning power,
each Right will entitle its holder (other than the acquiring
person or group) to purchase shares of common stock of the
acquiring company having a market value equal to twice the
exercise price. If any person or group acquires at least 15%, but
less than 50%, of the Company's Common Stock, the Board may, at
its option, exchange one share of Common Stock for each Right
(other than Rights held by such person or group). The Right Plan
may cause substantial dilution to a person or group that, without
prior Board approval, acquires 15% or more of the Company's
Common Stock, unless the Rights are first redeemed by the Board.
The Rights expire on February 1, 2009 and may be redeemed by the
Company at a price of $.01 per Right.
5. INCOME THE COMPONENTS OF THE PROVISION/(BENEFIT) FOR INCOME TAXES ARE AS
FOLLOWS:
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended November 30,
-------------------------------
1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
Federal
Current........................................... $ 15 $ 1,785 $ 455
Deferred.......................................... (28) (603) (102)
Provision in lieu of income taxes................. 2,928 527 257
State
Current........................................... 28 16 57
Provision/(benefit) in lieu of income taxes....... 310 513 (458)
-------- -------- ------
3,253 2,238 209
Less: Discontinued operations (provision)/benefit...... 373 (2,363) 351
Provision in lieu of taxes on the sale of
Calton Homes........................... (3,173) - -
-------- -------- ------
Continuing operations....................... $ 453 $ (125) $ 560
======== ======== ======
</TABLE>
F-11
<PAGE>
THE FOLLOWING SCHEDULE RECONCILES THE FEDERAL PROVISION (BENEFIT)
FOR INCOME TAXES COMPUTED AT THE STATUTORY RATE TO THE ACTUAL
PROVISION FOR INCOME TAXES
(AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
Years Ended November 30,
-------------------------------
1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
Computed provision for income taxes at 34%.......... $ 2,758 $ 2,242 $ 110
Expenses for which deferred tax benefit
cannot be currently recognized................. - - 501
Expenses for which deferred tax benefit is
currently recognized........................... (37) (399) -
State and local tax provision....................... 594 529 222
State tax reserves.................................. (550) - (624)
Expenses for which no tax benefit is available...... 488 - -
Other............................................... - (134) -
-------- -------- ------
Total provision for income taxes.................... 3,253 2,238 209
Less: Discontinued operations
(provision)/benefit.................. 373 (2,363) 351
Provision in lieu of taxes on the sale of
Calton Homes........................ (3,173) - -
-------- -------- ------
Continuing operations..................... $ 453 $ (125) $ 560
======== ======== ======
</TABLE>
In 1999 and 1997, the resolution of certain state tax issues
resulted in $550,000 and $624,000 of state tax reserves being
reduced as a reduction to the 1999 and 1997 provision for income
taxes. In addition, included in the Company's 1997 extraordinary
gain is a provision in lieu of income taxes of $842,000.
TEMPORARY DIFFERENCES AND CARRYFORWARDS WHICH GIVE RISE TO A
SIGNIFICANT PORTION OF DEFERRED TAX ASSETS AND LIABILITIES AT
NOVEMBER 30, 1999, AND 1998 ARE AS FOLLOWS:
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Deferred Tax Assets/(Liabilities)
-----------------------------------------------------
Continuing Operations Combined*
-------------------------- -----------------------
1999 1998 1999 1998
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Fresh-start inventory
reserves.................. $ - $ 31 $ - $ 322
Income from joint ventures..... - 129 33 129
Inventory and other reserves... - 594 - 1,173
Capitalized inventory costs.... - (263) - (479)
Federal net operating losses... 5,594 5,406 5,594 8,126
State net operating losses..... 2,248 2,227 2,662 4,265
Depreciation................... (6) 83 (6) 78
Deferred state taxes........... 5 328 131 615
Litigation reserve............. - - 187 -
Stock compensation............. - - 179 -
Other.......................... 23 40 109 17
---------- ---------- --------- -----------
7,864 8,575 8,889 14,246
Valuation allowances........... 7,864 (8,519) (8,805) (13,541)
---------- ---------- --------- -----------
Total deferred taxes........... $ - $ 56 $ 84 $ 705
----------- ---------- --------- -----------
</TABLE>
*Includes both continuing and discontinued operations
F-12
<PAGE>
Deferred income taxes arise from temporary differences between
the tax basis of assets and liabilities and their reported
amounts in the financial statements. For federal and state tax
purposes, a valuation allowance was provided on a significant
portion of the net deferred tax assets due to uncertainty of
realization. On December 31, 1998, Calton, Inc. sold the stock of
Calton Homes to an unrelated party and incurred a capital tax
loss. This loss will have a full valuation allowance due to
uncertainty of realization. The sale of Calton Homes resulted in
the termination of a significant portion of the net deferred tax
asset.
The federal net operating loss carryforward for tax purposes
is approximately $16,400,000 at November 30, 1999 and $23,900,000
at November 30, 1998. The sale of Calton Homes resulted in a
reduction of approximately $8,000,000 in Calton, Inc.'s federal
net operating loss carryforward. The Company's ability to use its
deferred tax assets including federal net operating loss
carryforwards, created prior to November 21, 1995, to offset
future income is limited to approximately $1,127,000 per year
under Section 382 of the Internal Revenue Code as a result of the
change in control of the Company in November 1995. The limitation
has been reduced by approximately $500,000 per year as a result
of the terms of the sale of Calton Homes. These federal
carryforwards will expire between 2007 and 2014. In 1997, the
Company received a tax refund related to prior periods of
$2,442,000. The Company paid income taxes of approximately
$1,640,000, $680,000 and $30,000, respectively, in 1999, 1998 and
1997.
6. COMMITMENTS (a) As part of the sale of Calton Homes on December 31,
AND 1998, the Company entered into a consulting agreement with the
CONTINGENT purchaser that requires the purchaser to make payments of
LIABILITIES $1,300,000 million per year over a three-year period to the
Company.
(b) If by June 30, 2000, the Company has not redeployed a
substantial portion of the proceeds of the Sale Transaction, or
developed a plan to redeploy a substantial portion of such
proceeds within in a reasonable time frame, the Company, subject
to shareholder approval, will be liquidated and dissolved.
Management currently expects to deploy or have a plan to deploy a
substantial portion of the proceeds by June 30, 2000.
(c) The stock purchase agreement pursuant to which the
Company sold Calton Homes on December 31, 1998 requires the
Company to indemnify the purchaser for, among other things,
breaches of the agreement and certain liabilities that arise out
of events occurring prior to the closing of the sale, including
the cost of warranty work on homes delivered if such costs exceed
$600,000. On December 31, 1998, as a condition to the sale of
Calton Homes, the Company entered into a holdback escrow
agreement with the purchaser pursuant to which $5,159,000 of the
closing proceeds were deposited into escrow. Of this amount,
$3,000,000 (the "General Indemnification Funds") was deposited to
provide security for the Company's indemnity obligations and
$2,159,000 (the "Specific Indemnification Funds") was deposited
to fund costs associated with certain specified litigation
involving Calton Homes. As of November 30, 1999 there was
$1,610,000 in the Specific Indemnification Funds, and $2,410,000
in the General Indemnification Funds, of which $962,000 was paid
to the Company in January 2000. In January 2000, the purchaser
asserted a $253,000 claim for indemnification related to certain
alleged misrepresentations and liabilities allegedly arising out
of the events occurring prior to the sale of Calton Homes. The
Company and the purchaser are attempting to resolve these claims
and is uncertain as to whether these claims will proceed to
arbitration pursuant to the indemnity agreement. The remaining
General Indemnification Funds will be disbursed to the Company,
subject to claims for indemnification, on December 31, 2000. The
Specific Indemnification Funds will be disbursed, to the extent
not otherwise utilized in the resolution of litigation, on a case
by case basis as the litigation is resolved. If all of the
specified litigation is not resolved by December 31, 2000, a
portion on the General Indemnification Funds will not be
disbursed to the Company until the resolution of the litigation.
The Company may, under certain circumstances, be required to
deposit additional funds in the holdback if all of the specified
litigation is not resolved by December 31, 2000. In addition, the
Company's indemnity obligations are not limited to the amounts
deposited in escrow. In the event that the Company elects to
liquidate and
F-13
<PAGE>
dissolve prior to December 31, 2003, it will be required to
organize a liquidating trust to secure its obligations to the
purchaser. The liquidating trust will be funded with the Specific
Indemnification Funds plus $3,000,000 if created between December
31, 1999 and December 31, 2000 and $2,000,000 if created after
December 31, 2000. If the liquidation occurs prior to December
31, 2000, the Company may be required to deposit additional
amounts in the liquidating trust if the specified litigation is
not resolved by such date. Any General Indemnification Funds
remaining in the holdback escrow fund will be applied as a credit
against amounts required to be deposited in the liquidating
trust.
(d) The Company assigned its operating lease in New Jersey
for office space expiring November 30, 2002 to Calton Homes.
Rental expense for the years ended November 30, 1999, 1998 and
1997 amounted to $45,000, $392,000 and $730,000 respectively.
The Company currently leases approximately 2,100 square feet
of office space located in Red Bank, New Jersey, for
approximately $4,700.00 per month. The term of this lease is on a
month-to-month basis. The Company also leases approximately 1,790
square feet of temporary office space on a month-to-month basis
in Vero Beach, Florida, for approximate $2,200.00 per month,
until its permanent space is available at the end of May 2000.
The permanent space at the same location will consist of
approximately 3,815 square feet, at a monthly rate of
approximately $5,722.00, for a term of 5 years.
The Company's subsidiary, eCalton, currently leases
approximately 4,000 square feet of office space, for
approximately $4,700 per month. The term of this lease is on a
month-to-month basis.
(e) The Company had a qualified contributory retirement plan
(401(k) Plan) which covered all eligible full-time employees with
a minimum of one year of service. The Company terminated the
401(k) Plan effective December 31, 1998. The Company's
contribution to the plan was $71,000 in 1998, and $30,000 in
1997. The Company's matching contribution, in the form of
registered Common Stock of the Company, for 1998 was 50% of
participant contributions, subject to a maximum of 3% of total
compensation and $2,000 per employee.
7. DISCONTINUED On December 31, 1998, the Company completed the sale of
OPERATIONS Calton Homes. The shareholders of Calton, Inc. approved the sale
of the stock of Calton Homes on December 30, 1998. The purchase
price for the stock of Calton Homes was $48,100,000 plus certain
post closing adjustments. The Company recorded a pretax gain of
$7,591,000 on the sale including the post closing adjustments.
Cash proceeds from the sale were approximately $43,440,000, net
of the $4,040,000 remaining holdback and $1,800,000 million cash
received from closing adjustments. No tax liability is expected
to result from the sale since the transaction resulted in a
capital loss for tax purposes. However, a provision in lieu of
taxes was recorded for financial reporting purposes in fiscal
1999 in the amount of $3,173,000 related to the sale transaction.
The gain was subject to the $5,200,000 holdback (see note 6) of
which $700,000 was refunded to the purchaser, out of the General
Indemnification Funds and included as part of the gain and
$592,000 was received by Calton pursuant to the terms of the
indemnification agreement. Future decreases to the escrows held
for indemnifications, if any, will be recorded as an adjustment
to the Income from the sale of Calton Homes. Calton has entered
into an agreement to provide consulting services to Centex that
requires payments to the Company of $1,300,000 per year over a
three-year period.
As a result of the sale of Calton Homes and the sale of the
Florida homebuilding assets that occurred at the end of fiscal
1997, the financial statements for the current and prior periods
have been restated to reflect the Company's homebuilding and real
estate development business as discontinued operations including
the operations of other subsidiaries located in Orlando, Florida;
Chicago, Illinois; Pennsylvania and California, where the Company
had similar operations and commercial land held for sale.
F-14
<PAGE>
RESULTS OF OPERATIONS FROM DISCONTINUED OPERATIONS ARE AS FOLLOWS
(AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
Years Ended November 30,
--------------------------------
1999 1998 1997
------- --------- ---------
<S> <C> <C> <C>
Revenues................................................. $ 6,763 $ 105,292 $ 126,588
------- --------- ---------
Cost of revenues......................................... 5,858 85,897 110,419
Selling, general and administrative...................... 1,518 10,172 12,532
Impairment of assets..................................... - - 750
------- --------- ---------
7,376 96,069 123,701
------- --------- ---------
Income (loss) from operations............................ (613) 9,223 2,887
Interest expense, net.................................... - 545 1,223
------- --------- ---------
Income (loss) before income taxes........................ (613) 8,678 1,664
Provision (benefit) for income taxes..................... (373) 2,363 (351)
------- --------- ---------
Net income (loss) from discontinued operations........... $ (240) $ 6,315 $ 2,015
======= ========= =========
</TABLE>
Selling, general and administrative costs include
approximately $984,000 of litigation costs related to the
resolution of indemnification obligations as a part of the sale
of Calton Homes.
Included in revenues for the year ended November 30, 1997,
is the Orlando, Florida division that generated $56,281,000 of
revenues, that included $16,660,000 of revenues from the 1997
Florida asset sale and resulted in a pretax gain of $615,000.
Interest paid for the years ended November 30, 1999, 1998
and 1997 was $209,000, $3,970,000 and $5,508,000, respectively.
NET ASSETS OF DISCONTINUED OPERATIONS ARE AS FOLLOWS
(AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
November 30,
---------------------
1999 1998
-------- ----------
<S> <C> <C>
Assets
Cash.................................................................... $ - $ 11,910
Receivables and other assets............................................ 104 9,385
Inventories............................................................. - 61,449
Commercial land......................................................... 109 252
Liabilities
Revolving credit agreement.............................................. - (21,000)
Mortgages payable....................................................... - (1,262)
Accounts payable and accrued expenses................................... (650) (21,883)
-------- ----------
Net assets (liabilities)..................................................... $ (437) $ 38,851
======== ==========
</TABLE>
F-15
<PAGE>
8. QUARTERLY QUARTERLY FINANCIAL RESULTS FOR THE YEARS ENDED
FINANCIAL NOVEMBER 30, 1999 AND 1998 ARE AS FOLLOWS
RESULTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS):
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------
February 28, May 31, August 31, November 30,
1999 1999 1999 1999
------------- --------- ------------ --------------
<S> <C> <C> <C> <C>
Net loss from continuing
operations........................ $ 159 $ 285 $ 178 $ 39
Net (loss) income from
discontinued operations........... 92 (379) (100) 147
Net income from the sale of
Calton Homes...................... 3,886 668 - (136)
============= ========= ============ ==============
Net (loss) income...................... $ 4,137 $ 574 $ 78 $ 50
------------- --------- ------------ --------------
Net income per share
Basic(b).......................... $ .16 $ .03 $ - $ -
============= ========= ============ ==============
Diluted(b)........................ $ .15 $ .02 $ - $ -
============= ========= ============ ==============
<CAPTION>
Three Months Ended
-------------------------------------------------------
February 28, May 31, August 31, November 30,
1998 1998 1998 1998
------------- --------- ------------ --------------
<S> <C> <C> <C> <C>
Net income from continuing
operations(a)..................... $ (301) $ (251) $ (352) $ (1,056)
Net income (loss) from
discontinued operations........... (236) 657 1,052 4,842
----------- --------- ------------ --------------
Net (loss) income...................... $ (537) $ 406 $ 700 $ 3,786
----------- --------- ------------ --------------
Net (loss) income per share,
basic and diluted................. $ (.02) $ .02 $ .03 $ .13
----------- --------- ------------ --------------
</TABLE>
(a) The increase in the net loss from continuing operations
for the three months ended November 30, 1998 is primarily a
result of intercompany charges from continuing operations to
discontinued operations.
(b) Net income per share does not agree to the per share
amounts presented on the face of the income statement as a
result of the impact of the stock repurchase program.
9. SUBSEQUENT On January 24, 2000 the Company purchased an additional
EVENTS 375,000 shares of common stock and a five-year warrant which
entitles the Company to purchase an aggregate of 225,000 shares
of CorVu Corporation common stock. The Warrant entitles the
Company to acquire certain specified quantities of shares at
specified exercise prices ranging from $2.00 per share to $8.00
per share. The aggregate exercise price is $900,000. The
aggregate acquisition amount for the stock and warrant was
$750,000. CorVu Corporation is traded under the symbol "CRVU" on
the OTC Bulletin Board. As of February 9, 2000 the common stock
was traded at $6.25 per share. Both the warrants and stock are
not registered and have current restrictions on trading.
In January 2000, the Company acquired a collective direct
and indirect (through ownership in a parent company) 50.4% equity
interest in PrivilegeONE Networks, Inc., a newly formed company
engaged in the development of a co-branded loyalty credit card
program. The purchase
F-16
<PAGE>
price for the Company's interest was comprised of $105,000 of
cash and a warrant to acquire 1,200,000 shares of Common Stock at
an exercise price of $2.50 per share. The warrant becomes
exercisable only if PrivilegeONE surpasses certain specified
earnings targets. In addition to its equity interest, the Company
has agreed to loan up to $1,500,000 to PrivilegeONE pursuant to a
note which bears interest at the rate of 10% per annum and
becomes due in January 2004.
F-17
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-70628, 33-75184 and 333-28135) of Calton, Inc. of
our report dated January 12, 2000, except as to the information described in
Note 9, which is as of February 18, 2000 relating to the financial statements
and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers, LLP
Florham Park, New Jersey
February 28, 2000
F-18
<PAGE>
SCHEDULE II
CALTON, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
----------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other At End
Description of Year Expenses Accounts Deductions of Year
----------- ------------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Year ended November 30, 1997:
Net realizable value reserves for inventory $ 1,113 $ 750 $ - $ 882(A) $ 981
============= ============= ============= ========== =============
Valuation allowance for net deferred tax asset $ 19,628 $ - $ - $ 3,538(B) $ 16,090
============= ============= ============= ========== =============
Year ended November 30, 1998:
Net realizable value reserves for inventory $ 981 $ - $ - $ 726 $ 726
============= ============= ============= ============ =============
Valuation allowance for net deferred tax asset $ 16,090 $ - $ - $ 2,549 $ 13,541
============= ============= ============= ============ =============
Year ended November 30, 1999:
Net realizable value reserves for inventory $ 255 $ - $ - $ 100 $ 155
============= ============= ============= ============ =============
Valuation allowance for net deferred tax asset $ 13,541 $ - $ - $ 4,736(c) $ 8,805
============= ============= ============= ========== =============
</TABLE>
(A) Represents the utilization of reserves recorded when affected homes are
delivered and land is sold.
(B) Represents the change in the valuation allowance due to the changes in the
deferred tax assets and the impact of the IRS Code Section 382 limitation
on those assets.
(C) The majority of the change in valuation allowance is due to the sale of
Calton Homes, Inc., and did not have an income statement impact.
F-19
<PAGE>
INDEX TO EXHIBITS
2.1 Agreement for Sale and Purchase of Assets dated as of November
26, 1997 between Beazer Homes Corp., Beazer Homes USA, Inc.,
Calton Homes of Florida, Inc. and Calton Homes, Inc.,
incorporated by reference to Exhibit 2 to Form 8-K of Registrant
dated December 1, 1997.
2.2 Amended and Restated Stock Purchase Agreement effective September
2, 1998 among Calton, Inc., Calton Homes, Inc. and Centex Real
Estate Corp., incorporated by reference to Exhibit 2 to Form 8-K
of Registrant dated December 31, 1998.
2.3 Amendment No. 1 to Amended and Restated Stock Purchase Agreement
dated as of December 28, 1998 among Calton, Inc., Calton Homes,
Inc. and Braewood Development Corp. (assignee of Centex Real
Estate Corp.), incorporated by reference to Exhibit 2.1 to Form
8-K of Registrant dated December 31, 1998.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant filed with the Secretary of State, State of New Jersey
on May 28, 1993, incorporated by reference to Exhibit 3.2 to
Amendment No. 1 to Form S-1 Registration Statement under the
Securities Act of 1933, Registration No. 33-60022, Certificate of
Amendment to Amended and Restated Certificate of Incorporation of
Registrant filed with the Secretary of State, State of New Jersey
on April 27, 1994, incorporated by reference to Exhibit 3(b) to
Form S-1 Registration Statement under the Securities Act of 1933,
Registration No. 33-76312, and Certificate of Amendment to
Amended and Restated Certificate of Incorporation of Registrant
filed with the Secretary of State, State of New Jersey on May 29,
1997, incorporated by reference to Exhibit 3.1 to Form 10-K of
Registrant for the fiscal year ended November 30, 1997, and
Certificate of Amendment to Amended and Restated Certificate of
Incorporation of Registrant filed with the Secretary of State,
State of New Jersey on February 2, 1999, incorporated by
reference to Exhibit 3.1 to Form 10-K of Registrant for the
fiscal year ended November 30, 1998.
3.2 By Laws of Registrant, as amended, incorporated by reference to
Exhibit 3.2 to Form 10-K of Registrant for the fiscal year ended
November 30, 1998.
4.1 Warrant to Purchase Common Stock of Calton, Inc. dated June 12,
1997 issued to BankBoston, N.A., incorporated by reference to
Exhibit 10.2 to Form 8-K of Registrant dated June 12, 1997.
4.2 Warrant to Purchase Common Stock of Calton, Inc. dated January
2000 issued to Taytrowe Van Fechtmann World Companies, Inc.
4.3 Rights Agreement dated February 1, 1999 by and between the
Registrant and First City Transfer Company as Rights Agent,
including forms of Rights Certificate and Election to Purchase
included as Exhibit B thereto, incorporated by reference to
Exhibit 1 to Form 8-A Registration Statement of Registrant filed
with the Securities and Exchange Commission on February 2, 1999.
(*) 10.1 1996 Equity Incentive Plan, incorporated by reference to Exhibit
10.1 to Form 10-K of Registrant for the fiscal year ended
November 30, 1996.
(*) 10.3 Registrant's Amended and Restated 1993 Non-Qualified Stock Option
Plan, incorporated by reference to Exhibit 10.3 to Form 10-K of
Registrant for the fiscal year ended November 30, 1995.
(*) 10.4 Incentive Compensation Plan of Registrant.
E-1
<PAGE>
(*) 10.6 Severance Policy for Senior Executives of Registrant,
incorporated by reference to Exhibit 10.6 of Form 10-K of
Registrant for the fiscal year ended November 30, 1994.
(**) 10.7 Executive Employment Agreement dated as of November 21, 1995
between Registrant and Anthony J. Caldarone, incorporated by
reference to Exhibit 10.7 to Form 10-K of Registrant for the
fiscal year ended November 30, 1995 and Amendment to Executive
Employment Agreement dated as of April 14, 1999.
10.8 Senior Secured Credit Agreement dated as of June 12, 1997, among
Calton Homes, Inc., Calton Homes of Florida, Inc. and BankBoston,
N.A., incorporated by reference to Exhibit 10.1 to Form 8-K of
Registrant dated June 12, 1997.
10.9 Consulting Agreement between Registrant and Braewood Development
Corp. dated December 31, 1998, incorporated by reference to
Exhibit 10.9 to Form 10-K of Registrant for the fiscal year ended
November 30, 1998.
(*) 10.10 2000 Equity Incentive Plan.
(*) 10.11 Option Agreement dated July 19, 1999 between the Company and
Kenneth D. Hill. Agreements identical in term and content between
the Registrant and each of Matthew R. Smith and Robert K. Hill
have been executed. These documents have not been reproduced
herein.
(**) 10.12 Employment Agreement dated as of July 19, 1999 between
eCalton.com, Inc. and Kenneth D. Hill.
21. Subsidiaries of the Registrant.
27. Financial Data Schedule.
(*) Constitutes a compensatory plan required to be filed by an exhibit pursuant
to Item 14(c) of Form 10-K.
(**) Constitutes a management contract required to be filed pursuant to Item
14(c) of Form 10-K.
EXHIBIT 4.2
WARRANT TO PURCHASE
COMMON STOCK OF
CALTON, INC.
NEITHER THIS WARRANT NOR ANY SECURITIES PURCHASABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND NEITHER THIS WARRANT NOR ANY SECURITIES PURCHASABLE
UPON EXERCISE HEREOF MAY BE SOLD OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE SECURITIES LAWS, OR EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND LAWS.
-------------------------
This is to certify that, FOR VALUE RECEIVED, Taytrowe Van Fechtmann World
Companies, Inc. ("TVF"), or its designee (the "Holder") or registered assigns is
entitled to purchase, subject to the provisions of this Warrant, from CALTON,
INC., a New Jersey corporation (the "Company"), 1,200,000 shares of the
Company's Common Stock, $.01 par value (the "Common Stock"), at a price per
share equal to TWO AND 50/100 DOLLARS ($2.50) at any time during the period from
January 27, 2000 (the "Closing Date") to 5:00 P.M., New York City Time, on the
Expiration Date (as hereinafter defined), at which time this Warrant shall
expire and become void. Exercise of this Warrant is conditioned upon the
satisfaction by PrivilegeOne Networks, Inc. ("PNI"), a subsidiary of TVF, of
certain financial performance criteria, as hereinafter set forth. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock shall be adjusted from time to
time as hereinafter set forth. The shares of Common Stock or other securities or
property deliverable upon such exercise, as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Warrant Price". Unless the context
otherwise requires, the term "Warrant" or "Warrants" as used herein includes
this Warrant and any other Warrant or Warrants which may be issued pursuant to
the provisions of this Warrant, whether upon transfer, assignment, partial
exercise, divisions, combinations, exchange or otherwise, and the term "Holder"
includes any transferee or transferees or assignee or assignees of the Holder
named above, all of whom shall be subject to the provisions of this Warrant,
and, when used with reference to Warrant Shares, means the holder or holders of
such Warrant Shares. The term "Expiration Date" means that date which is five
(5) years from the Closing Date.
<PAGE>
Section 1. Exercise of Warrant.
1.1 If (a) PNI achieves fifty percent (50%) of the EBITDA Projection (as
hereinafter defined) for the first four (4) full fiscal quarters on a cumulative
basis following the Closing Date or (b) PNI's cumulative EBITDA (as hereinafter
defined) during any four (4) consecutive fiscal quarters during the two year
period commencing with the beginning of the first fiscal quarter following the
Closing Date exceeds $5,000,000, then, upon the presentation of financial
statements reasonably satisfactory to the Company demonstrating PNI's
achievement of the financial performance criteria set forth in clauses (a) or
(b) above, this Warrant shall become exercisable and may be exercised in whole
or in part at any time or from time to time before 5:00 P.M., New York City
Time, on the Expiration Date, or if either such day is a day on which Federal or
State chartered banking institutions located in the State of New Jersey are
authorized by law to close, then on the next succeeding day which shall not be
such a day, by presentation and surrender hereof to the Company at its principal
office or, subject to Section 9, at the office or its stock transfer agent, if
any, with the Purchase Form annexed hereto duly executed and accompanied by
payment, in cash or certified or official bank check payable to the order of the
Company, of the aggregate Warrant Price for the number of Warrant Shares
specified in such form. If this Warrant should be exercised in part only, the
Company shall, upon presentation of this Warrant upon such exercise, execute and
deliver a new Warrant, dated the date hereof, evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
hereunder under the same terms and conditions as herein set forth. Upon and as
of receipt by the Company of this Warrant at its office or, subject to Section
9, by the stock transfer agent, at its office, in proper form for exercise and
accompanied by payment as herein provided, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
1.2 The term "EBITDA" as used herein means Earnings Before Interest, Tax,
Depreciation and Amortization, as determined in accordance with generally
accepted accounting principles. The term "EBITDA Projection" as used herein
means forecasted EBITDA for PNI, as set forth on Exhibit A hereto, subject to
reasonable adjustment to reflect any agreement between PNI and a card issuer.
1.3 The term "fiscal quarter" as used herein means any of the three month
periods commencing December 1, March 1, June 1 or September 1 of each year.
Section 2. Reservation of Shares. The Company hereby agrees that at all
times until expiration of this Warrant there shall be reserved for issuance
and/or delivery upon exercise of this Warrant such number of shares of its
Common Stock as shall be required for issuance or delivery upon exercise of this
Warrant.
Section 3. Exchange or Loss of Warrant.
3.1 This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company at its principal
office or, subject to Section 9, at the office of its stock transfer agent, if
any, for other Warrants of different denominations entitling the Holder thereof
to purchase in the aggregate the same number of Warrant Shares purchasable
hereunder on the same terms and conditions as herein set forth.
<PAGE>
3.2 Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date and any such lost,
stolen, or destroyed Warrant shall thereupon become void. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not the Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
Section 4. Warrant Price. The exercise price at which Warrant Shares shall
be purchasable upon exercise of this Warrant shall be TWO AND 50/100 DOLLARS
($2.50) per share, subject to adjustment pursuant to Section 5 of this
Agreement.
Section 5. Adjustment of Warrant Price and Number of Warrant Shares. The
Warrant Price and the number and kind of securities purchasable upon the
exercise of this Warrant shall be subject to adjustment from time to time upon
the happening of certain events or as otherwise provided in this Section 5;
provided that in no event shall the Warrant Price be reduced below the par value
of the Warrant Shares at the time of such adjustment. The Warrant Price in
effect at any time and the number and kind of securities purchasable upon
exercise of this Warrant shall be subject to adjustment as follows:
5.1 Stock Dividends, Reclassification and Recapitalization. In case the
Company shall (i) pay a dividend or make a distribution on all of its
outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide,
reclassify or recapitalize its outstanding Common Stock into a greater number of
shares, or (iii) combine, reclassify or recapitalize its outstanding Common
Stock into a smaller number of shares, the Warrant Price in effect at the time
of the record date for such dividend or distribution or on the effective date of
such subdivision, combination, reclassification or recapitalization shall be
proportionately adjusted (but in no event shall the aggregate Warrant Price for
all of the shares of Common Stock subject to this Warrant be in excess of
$3,000,000) and the Holder of any Warrant exercised after such date shall be
entitled to receive the aggregate number and kind of shares which, if such
Warrant had been exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive upon such dividend, subdivision,
combination, reclassification or recapitalization. Such adjustment shall be made
successively whenever any event listed in this Section 5.1 shall occur.
5.2 Notice of Adjustment. Whenever the number of Warrant Shares purchasable
upon the exercise of this Warrant or the Warrant Price of such Warrant Shares is
adjusted, as herein provided, the Company shall file in the custody of its
Secretary or an Assistant Secretary at its principal office and subject to
Section 9, with its stock transfer agent, if any, an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Warrant Price of the Warrant Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder of this Warrant and the Company shall, forthwith after
each such adjustment, mail a copy of such certificate to such Holder by
first-class mail, postage prepaid.
<PAGE>
5.3 No Adjustment for Dividends. Except as provided in Section 5.1 of this
Warrant, no adjustment in respect of any cash dividends shall be made during the
term of this Warrant or upon exercise of this Warrant.
5.4 Purchase Rights Upon Merger, Consolidation, etc. In case of any
consolidation of the Company with or merger of the Company into another
corporation or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
surviving corporation, if other than the Company, resulting therefrom or the
acquiring corporation, as the case may be, shall assume by written agreement the
obligation to deliver, upon exercise of this Warrant and payment of the Warrant
Price in effect immediately prior to such corporate event, the kind and amount
of shares or other securities and property which the Holder would have owned or
have been entitled to receive after the happening of such consolidation, merger,
sale or conveyance had this Warrant been exercised immediately prior thereto.
Section 6. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of this Warrant. If any fraction of a
Warrant Share would, except for the provisions of this Section 6, be issuable on
the exercise of this Warrant (or specified portion hereof), then the Company
shall elect, at its option to either (i) round such fractional Warrant Share
upwards to the nearest whole Warrant Share or (ii) pay to the holder an amount
in cash equal to such fraction multiplied by the then current fair value of a
Warrant Share, determined as follows:
6.1 If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange, the current fair value
shall be the last reported sale price of the Common Stock on such exchange on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange; or
6.2 If the Common Stock is not so listed or admitted to unlisted trading
privileges, the current fair value shall be the mean of the last reported bid
and asked prices reported by the Nasdaq Stock Market (or, if not so quoted on
the Nasdaq Stock Market, by the NASD Electronic Bulletin Board) on the last
business day prior to the day of the exercise of this Warrant; or
6.3 If the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current value shall
be an amount determined in such reasonable manners may be prescribed by the
Board of Directors of the Company, such determination to be final and binding on
the Holder.
Section 7. No Rights as Shareholders; Notices to Holders. Nothing contained
in this Warrant shall be construed as conferring upon the Holder or any
transferee the right to vote or to receive dividends or to consent or to receive
notice as shareholders in respect of any meeting of shareholders for the
election of directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company, prior to the valid exercise of this
Warrant and receipt of the Warrant Shares hereunder.
Section 8. Notice of Certain Proposed Actions. In case at any time the
Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
<PAGE>
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any rights, warrants or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease or conveyance of
property described in Section 5; or
(d) to effect any liquidation, dissolution or winding-up of the
Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder, at the
Holder's address as it shall appear in the warrant register, mailed at least 15
days prior to the earlier to occur of (i) the date as of which the holders of
record of shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants or other securities are to be determined, or (ii)
the date on which any such reclassification, change of outstanding shares of
Common Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution, or winding up is expected to become effective, and the
date as of which it is expected that holders of record of shares of Common
Stock, as the case may be, shall be entitled to exchange their shares or
warrants for securities or other property, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution, or winding up.
Section 9. Transfer to Comply with the Securities Act of 1933.
9.1 This Warrant or the Warrant Shares may not be sold or otherwise
disposed of except to a person who, in the opinion of counsel in form and
substance satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may be legally transferred within the terms of this Warrant and
without registration and without the delivery of a current prospectus with
respect thereto under the Securities At of 1933, as amended, and then only
against receipt of an agreement of such person to comply with the provisions of
this Section 8 with respect to any resale or other disposition of such Warrant
or Warrant Shares unless, in the opinion of counsel, such agreement is not
required; or
9.2 Each certificate for Warrant Shares or for any other security issued or
issuable upon exercise of this Warrant shall contain a legend on the face
thereof, in the form and substance satisfactory to counsel of the Company,
setting forth the restrictions on transfer thereof contained in Section 8.1
hereof.
Section 10. Piggyback Registration Rights.
10.1 Grant of Rights. If, after the time this Warrant becomes exercisable),
the Company at any time proposes to file a registration statement (other than
upon Form S-4, Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") relating to the Company's Common Stock, the
Company shall give the Holders of Warrants and the holders of Common Stock
acquired upon exercise of the Warrants prompt written notice thereof. If
requested by any such holder in writing within 15 days receipt of any such
notice, the
<PAGE>
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for such holder and the underwriting discounts, if any,
payable in respect of the shares of Common Stock to be sold by such holder),
include in such registration the Common Stock acquired or acquirable upon
exercise of this Warrant (collectively, the "Registrable Shares") of any such
holder who shall have made such request concurrently with the registration
covering such other securities of the Company.
10.2 Underwriter Cutbacks. If the good faith judgment of the managing
underwriter the inclusion of all of the Registrable Shares requested to be
registered under this Section 10 would adversely affect the marketing of the
shares for which the registration statement was to be filed, the number of
Registrable Shares otherwise to be included in the underwritten public offering)
may be reduced pro rata (by number of shares requested to be registered) among
the holders thereof requesting registration. All holders proposing to distribute
their Registrable Shares through such underwriting shall (together with the
Company) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected.
10.3 Expenses. With respect to any registration under this Section 10, the
Company shall bear the following fees, costs and expenses: all registration,
filing and NASD fees, printing expenses, fees and disbursements of counsel for
the underwriter of such securities (if the Company or the selling security
holders are required to bear such fees and disbursements), all internal Company
expenses, all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered or qualified, and any premiums or other costs
of policies of insurance, if any, arising out of such public offering, except
that Company shall not be required to expend more than twenty thousand dollars
($20,000.00) in blue sky fees. Fees and disbursements of counsel for the selling
security holders, underwriting discounts and commissions and transfer taxes
relating to the shares included in the offering, and any other expenses not
expressly included above, shall be borne by the selling security holders.
10.4 Other Obligations of the Company.
(a) The Company shall use its best efforts to cause the Registrable
Shares registered under this Section 10 to be registered or qualified for
sale under the securities or "blue sky" laws of such jurisdictions as such
holders may reasonably request; provided, however, that the Company shall
not be required to qualify to do business in any state by reason of this
paragraph in which it is not otherwise required to qualify to do business.
(b) The Company shall keep effective the registration or qualification
contemplated by this Section 10 and shall from time to time amend or
supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period
of time as shall be required to permit the holders to complete the offer
and sale of the Registrable Shares covered thereby. The Company shall in no
event be required to keep any such registration or qualification in effect
for a period in excess of six months from the date on which the holders are
first free to sell such Registrable Shares.
(c) In connection with a registration pursuant to the provisions of
this Section 10, the Company shall furnish to each holder of any
Registrable Shares included therein such number of copies of the
registration statement and of each amendment and
<PAGE>
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration
statement and each supplement or amendment thereto (including each
preliminary prospectus), all of which shall conform to the requirements of
the Securities Act, and the roles and regulations thereunder, and such
other documents, as the holders may reasonably request in order to
facilitate the disposition of the Registrable Shares included in such
registration.
(d) The Company agrees that it shall keep current in filing all
reports, statements and other materials required to be filed with the
Commission to permit holders of the Registrable Shares to sell such
securities under Rule 144.
(e) Notwithstanding anything to the contrary herein, the Company shall
not be required to register the Registrable Shares if counsel for the
Company delivers an opinion to the holders that the proposed sale of
Registrable Shares may be effected in its entirety within any 90 day period
without registration and without any further holding period pursuant to
Rule 144 under the Securities Act of 1933, as amended.
10.5 Indemnification.
(a) The Company will indemnify each holder for whom shares are
registered pursuant to this Section 10 (a "Selling Shareholder"), and each
underwriter, if any, and each Person who controls any underwriter, against
all claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue
statement of a material fact contained in any prospectus, offering circular
or other document (including any related registration statement,
notification or the like) incident to any such registration, or based on
any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or the Exchange Act or any
rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse the Selling
Shareholder for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim,
loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by the
Selling Shareholder or underwriter and stated to be specifically for use
therein. Notwithstanding the foregoing, the obligation of the Company to
provide indemnity pursuant to this subsection shall not apply to amounts
paid in settlement of any such loss, claim, damage or liability if such
settlement is effected without the consent of the indemnifying party (which
consent shall not be unreasonably withheld).
(b) Each Selling Shareholder will, if Registrable Securities held by
it are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors, officers and
employees and each underwriter, if any, of the Company's securities covered
by such a registration statement, and each Person who controls the Company
or such underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue
statement of a material fact contained in any such registration statement,
prospectus, offering circular
<PAGE>
or other document, or any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading or any violation by the Selling Shareholder of the
Securities Act or the Exchange Act or any rule or regulation thereunder
applicable to the Selling Shareholder and relating to action or inaction
required of the Selling Shareholder in connection with any such
registration, qualification or compliance, and will reimburse the Company,
each of its officers, directors and employees, and each Person who controls
the Company, each such underwriter and each Person who controls any such
underwriter for any legal or any other expenses reasonably incurred in
connection with investigating and defending or settling such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement or omission is made in such registration
statement, prospectus, offering circular or other document in reliance upon
and in conformity with written information furnished to the Company by the
Selling Shareholder and stated to be specifically for use therein;
provided, however, that the obligations of the Selling Shareholder
hereunder shall be limited to an amount equal to the proceeds to the
Selling Shareholder of securities sold as contemplated herein, unless such
claim, loss, damage or liability resulted from the Selling Shareholder's
fraudulent misconduct. Notwithstanding the foregoing, the obligation of a
Selling Shareholder to provide indemnity pursuant to this subsection shall
not apply to amounts paid in settlement of any such loss, claim, damage or
liability if such settlement is effected without the consent of the
indemnifying party (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 10 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any such claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense,
and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 10 provided that such failure does not
prejudice the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation. Each Indemnified
Party shall furnish such information regarding itself or the claim in
question as an Indemnifying Party may require in connection with defense of
such claim and litigation resulting therefrom.
(d) Contribution. If recovery is not available under the foregoing
indemnification provisions of Section 10, for any reason other than as
specified therein, the parties entitled to indemnification by the terms
thereof shall be entitled to contribution to liabilities and expenses. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by each
party from the offering of the securities (taking into account the portion
of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted,
<PAGE>
the opportunity to correct and prevent any statement or omission and any
other equitable considerations appropriate under the circumstances.
Notwithstanding the provisions of this Section 10, no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act), shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
Section 11. Stock Transfer Agent. Any reference in this Warrant to the
stock transfer agent shall apply if, and only if, the Company shall have advised
the Holder that such an agent has been designated as an agency for the transfer
or exercise of this Warrant.
Section 12. Governing Law. This Warrant is being delivered in the State of
New Jersey, and this Warrant shall be construed in accordance with the laws of
such state applicable to contracts executed and to be performed wholly within
such state.
Section 13. Notice. Notices and other communications to be given to the
Holder of the Warrants evidenced by this certificate shall be deemed to have
been sufficiently given, if delivered or mailed, addressed in the name and at
the address of such owner appearing on the records of the Company, and if
mailed, sent registered or certified mail, postage prepaid. Notices or other
communications to the Company shall be deemed to have been sufficiently given if
delivered by hand or mailed postage prepaid, to the Company 500 Craig Road,
Manalapan, New Jersey 07726-87890.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the ____
day of January, 2000.
CALTON, INC.
By:
------------------------------
ANTHONY J. CALDARONE, Chairman
of the Board, President and Chief
Executive Officer
TAYTROWE VAN FECHTMANN
WORLD COMPANIES, INC.
By:
------------------------------
<PAGE>
Schedule A
EBITDA PROJECTION
Fiscal Quarter ended
<TABLE>
<CAPTION>
May 31, 2000 August 31, 2000 November 30, 2000 February 28, 2001
------------ --------------- ----------------- -----------------
<S> <C> <C> <C>
($656,260) $4,571,473 $21,941,599 $25,554,552
</TABLE>
<PAGE>
PURCHASE FORM
(To be executed by the holder of the Warrant if he (it) desires to exercise
the Warrant in whole or in part)
TO: CALTON, INC.
The undersigned, whose Social Security or other identifying number is
_______, hereby irrevocably elects the right of purchase represented by the
within Warrant for, and to purchase thereunder, _________ shares of Common Stock
provided for therein and tenders payment therewith to the order of CALTON, INC.,
in the amount of $_________. The undersigned requests that certificates for such
shares of Common Stock be issued as follows:
Name:
---------------------------------------------------------
Address:
---------------------------------------------------------
Deliver to:
---------------------------------------------------------
Address:
---------------------------------------------------------
and, if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under the within Warrant be registered
in the name of, and delivered to, the undersigned at the address stated below:
Address:
---------------------------------------------------------
Dated: Signature
---------------------------
(Signature must conform in all respects
to the name of the Holder of the
Warrant, without alteration,
enlargement or any change whatsoever,
and the signature must be guaranteed in
the usual manner).
Signature Guaranteed:
EXHIBIT 10.4
CALTON, INC. INCENTIVE COMPENSATION PLAN
1. PURPOSE
Pursuant to Calton's ("Calton" or the "Company") philosophy of providing
compensation to its employees which is competitive with the compensation offered
by similar companies operating in the same regions and emphasizing incentive
compensation as a result of the cyclical nature of the Company's business, the
Company has established the Calton, Inc. Incentive Compensation Plan (the
"Plan") to promote the interests of Calton and its shareholders by enhancing the
Company's ability to attract, retain and motivate highly qualified individuals
to serve the Company and its subsidiaries by providing such individuals the
opportunity to earn meaningful additional compensation based on the operating
results of the Company.
2. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall be effective as of June 1, 1993, subject to the approval of
the Company's Board of Directors (the "Board"), and it shall terminate on
November 30, 2000 (the "Term"). The Board, in its sole discretion, may renew,
for up to two (2) fiscal years upon each such renewal, the Term of the Plan and
the provisions hereunder.
3. PARTICIPATION
All officers of the Company and its subsidiaries and all managers that
participate in the Company's Management Objective Bonus Program are eligible for
participation in the Plan. In addition, up to 10% of the Incentive Pool (as
defined below) may be used for bonuses to other full time employees of the
Company and its subsidiaries who are not otherwise eligible for commissions or
bonuses. The employees that are eligible to participate in the Plan (the
"Eligible Employees") shall be determined each fiscal year by the Compensation
Committee of the Board (the "Committee") based on the recommendations of the
President and Chief Executive Officer of the Company. The determination of
Eligible Employees entitled to participate in the Plan shall be made by the
Committee no later than the end of the first quarter of any fiscal year;
provided, however, that an Eligible Employee hired after the end of the first
quarter of any fiscal year may be considered by the Committee for participation
in the Plan. Participation in the Plan during any one fiscal year does not imply
or guarantee participation in any other fiscal year during the Term of the Plan.
4. INCENTIVE COMPENSATION
The available pool of incentive compensation (the "Incentive Pool") under
this Plan during any particular fiscal year shall be equal to ten percent (10%)
of the Company's pre-tax income as reported in the Company's Form 10-K for a
particular fiscal year, subject to certain non-operating adjustments (the
"Adjustments") that may be made to the Incentive Pool at the discretion of the
Committee to remove the effect of events or transactions not in the ordinary
course of the Company's operations.
5. DISTRIBUTION OF INCENTIVE COMPENSATION
The President and Chief Executive Officer of the Company shall recommend
the dollar amount of an award from the Incentive Pool (the "Incentive Award") to
be granted to each
<PAGE>
Eligible Employee participating in the Plan; provided, however, that an Eligible
Employee participating in the Plan may not receive an Incentive Award during any
particular fiscal year that exceeds the lesser of twenty percent (20%) of the
Incentive Pool or one hundred percent (100%) of the Eligible Employee's base
salary compensation for the same fiscal year; provided, however, that the
Committee reserves the right to make special, supplemental grants that exceed
one hundred percent (100%) of an Eligible Employee's base salary for the same
fiscal year. The Committee shall then review and approve, with the power to
alter, modify or disapprove in whole or in part, the proposed Incentive Award
for each Eligible Employee participating in the Plan no later than February 15
of the succeeding fiscal year, or the fifteenth day of the last month of the
first quarter of the succeeding fiscal year if the end of such preceding fiscal
year is other than November 30. An Eligible Employee selected for participation
in the Plan who was hired by the Company or one of its subsidiaries subsequent
to the commencement of the relevant fiscal year shall only be entitled to a
pro-rata portion of any Incentive Award. An Eligible Employee participating in
the Plan shall not be entitled to receive any Incentive Award until the grant of
any such Incentive Award has been approved by the Committee. Any Incentive Award
shall be distributed and paid to and Eligible Employee in accordance with the
Company's ordinary payroll policies and procedures during the last pay period of
February of each fiscal year, or during the last pay period of the last month of
the first quarter of the fiscal year if the end of such preceding fiscal year is
other than November 30. All approved and paid Incentive Awards shall be subject
to all tax withholding and reporting requirements.
6. TERMINATION
Upon the termination of employment of an Eligible Employee selected to
participate in the plan for a particular fiscal year for any reason the
Committee shall not grant, and the Eligible Employee shall not be entitled to,
an Incentive Award for the fiscal year in which termination occurred, unless
otherwise determined by the Board of Directors.
7. AMENDMENT OR DISCONTINUANCE
At any time during the Term of the Plan, the Committee may alter, amend,
suspend or discontinue the Plan.
8. OTHER AGREEMENTS
In the event that any term or condition of this Plan varies from, or is in
any way dissimilar to or in contrast with, any term, condition or provision of
any other agreement between the Company and an Eligible Employee, such as an
employment agreement, the relevant terms, conditions and/or provisions of such
other agreement will control.
9. SUCCESSORS
The provisions of the Plan shall be binding upon all successors of any
Eligible Employee granted an Incentive Award under the Plan, including, without
limitation, the estate of any such Eligible Employee and the executors,
administrators or trustees of such estate, and any receiver, trustee in
bankruptcy or representative of the creditors of any such Eligible Employee. Any
obligations with respect to Incentive Awards granted pursuant to the Plan shall
be expressly assumed by any successor in interest to the Company.
<PAGE>
10. GOVERNING LAW AND JURISDICTION OF NEW JERSEY COURTS
This Plan and any agreement entered into in connection therewith shall be
construed and its provisions enforced and administered in accordance with the
laws of the State of New Jersey.
[The foregoing reflects amendments made through July 14, 1999.]
EXHIBIT 10.7
AMENDMENT TO
EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment to Executive Employment Agreement is entered into as of this
14th day of April, 1999 by and between Calton, Inc. (the "Employer" or the
"Company"), a New Jersey corporation with offices located at 500 Craig Road,
Manalapan, New Jersey 07726, and Anthony J. Caldarone (the "Executive"), an
individual residing at 162 Anchor Drive, Vero Beach, Florida 32963.
WHEREAS, the Employer and Executive have entered into an Executive
Employment Agreement dated as of November 21, 1995 (the "Employment Agreement");
WHEREAS, the Board of Directors of the Employer have approved an extension
of the term of the Employment Agreement to November 30, 2001;
NOW, THEREFORE, in consideration of the representations, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Extension of Term. Section 1.1 of the Employment Agreement is hereby
amended to read in its entirety as follows:
1.1 Term. The term of this Agreement shall commence on November
21, 1995 and end on November 30, 2001 (the "Term").
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first written above.
WITNESS:
- ------------------------------------ -----------------------------
Anthony J. Caldarone
ATTEST: CALTON, INC.
By:
- ------------------------------------ --------------------------
Mary Magee, Secretary David J. Coppola,
Vice President
EXHIBIT 10.10
CALTON, INC.
2000 EQUITY INCENTIVE PLAN
1. PURPOSE.
The purpose of this Calton, Inc. 2000 Equity Incentive Plan (the "Plan") is to
advance the interests of Calton, Inc. (the "Company") and its subsidiaries by
enhancing the ability of the Company to (i) attract and retain employees and
other persons or entities who are in a position to make significant
contributions to the success of the Company and its subsidiaries; (ii) reward
such persons for such contributions; and (iii) encourage such persons or
entities to take into account the long-term interest of the Company through
ownership of shares of the Company's common stock, $.01 par value per share (the
"Common Stock").
The Plan is intended to accomplish these objectives by enabling the Company to
grant awards ("Awards") in the form of incentive stock options ("ISOs"),
nonqualified stock options ("Nonqualified Options") (ISOs and Nonqualified
Options shall be collectively referred to herein as "Options"), stock
appreciation rights ("SARs"), restricted stock ("Restricted Stock"), deferred
stock ("Deferred Stock"), or other stock based awards ("Other Stock Based
Awards"), all as more fully described below.
2. ADMINISTRATION.
The Plan will be administered by the Compensation Committee (the "Committee") of
the Board of Directors of the Company (the "Board"). The Committee may be
constituted to permit the Plan to comply with the "outside director" requirement
of Section 162(m)(4)(c)(i) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder, or any successor rules. The
Committee will determine the recipients of Awards, the times at which Awards
will be made, the size and type or types of Awards to be made to each recipient,
and will set forth in each such Award the terms, conditions and limitations
applicable to the Award granted. Awards may be made singly, in combination or in
tandem. The Committee will have full and exclusive power to interpret the Plan,
to adopt rules, regulations and guidelines relating to the Plan, to grant
waivers of Plan restrictions and to make all of the determinations necessary for
its administration. Such determinations and actions of the Committee, and all
other determinations and actions of the Committee made or taken under authority
granted by any provision of the Plan, will be conclusive and binding on all
parties.
3. EFFECTIVE DATE AND TERM OF PLAN.
The Plan will become effective on January 27, 2000, but shall be subject to
approval by the requisite vote of the Company's shareholders. Any Awards granted
under the Plan prior to such shareholder approval shall be conditioned upon such
shareholder approval and shall be null and void if such approval is not
obtained.
The Plan will terminate on January 27, 2010, subject to earlier termination of
the Plan by the Board pursuant to Section 18 herein. No Award may be granted
under the Plan after
<PAGE>
the termination date of the Plan, but Awards previously granted may extend
beyond that date pursuant to the terms of such Awards.
4. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 16 herein, the aggregate number of
shares of Common Stock reserved for issuance pursuant to Awards granted under
the Plan shall be four million (4,000,000) shares. The maximum number of shares
of Common Stock which may be issued to the Chief Executive Officer ("CEO") of
the Company pursuant to all Awards granted the CEO under the Plan shall not
exceed thirty-five percent (35%) of the number of shares of the Company's Common
Stock reserved for issuance hereunder. The maximum number of shares of the
Company's Common Stock awarded to any other "Participant" (as defined in Section
5 below) pursuant to all Awards granted to such Participant under the Plan shall
not exceed twenty percent (20%) of the number of shares of the Company's Common
Stock reserved for issuance hereunder.
The shares of Common Stock delivered under the Plan may be either authorized but
unissued shares of Common Stock or shares of the Company's Common Stock held by
the Company as treasury shares, including shares of Common Stock acquired by the
Company in open market and private transactions. No fractional shares of Common
Stock will be delivered pursuant to Awards granted under the Plan and the
Committee shall determine the manner in which fractional share value will be
treated.
If any Award requiring exercise by a Participant for delivery of shares of
Common Stock is cancelled or terminates without having been exercised in full,
or if any Award payable in shares of Common Stock or cash is satisfied in cash
rather than Common Stock, the number of shares of Common Stock as to which such
Award was not exercised or for which cash was substituted will be available for
future Awards of Common Stock; provided, however, that Common Stock subject to
an Option cancelled upon the exercise of an SAR shall not again be available for
Awards under the Plan unless, and to the extent that, the SAR is settled in
cash. Shares of Restricted Stock and Deferred Stock forfeited to the Company in
accordance with the Plan and the terms of the particular Award shall be
available again for Awards under the Plan unless the Committee determines
otherwise.
5. ELIGIBILITY AND PARTICIPATION.
Those eligible to receive Awards under the Plan (each, a "Participant" and
collectively, the "Participants") will be persons in the employ of the Company
or any of its subsidiaries designated by the Committee ("Employees") and other
persons or entities who, in the opinion of the Committee, are in a position to
make a significant contribution to the success of the Company or its
subsidiaries, including, without limitation, consultants and agents of the
Company or any subsidiary; provided, that such consultants and agents have been
actively engaged in the conduct of the business of the Company or any
subsidiary. A "subsidiary" for purposes of the Plan will be a present or future
corporation of which the Company owns or controls, or will own or control, more
than 50% of the total combined voting power of all classes of stock or other
equity interests.
<PAGE>
6. OPTIONS.
(a) Nature of Options. An Option is an Award entitling the Participant to
purchase a specified number of shares of Common Stock at a specified
exercise price. Both ISOs, as defined in Section 422 of the Code, and
Nonqualified Options may be granted under the Plan; provided however,
that ISOs may be awarded only to Employees.
(b) Exercise Price. The exercise price of each Option shall be equal to
the "Fair Market Value" (as defined below) of the Common Stock on the
date the Award is granted to the Participant; provided, however, that
(i) in the Committee's discretion, the exercise price of a
Nonqualified Option may be less than the Fair Market Value of the
Common Stock on the date of grant; (ii) with respect to a Participant
who owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, the option price of an
ISO granted to such Participant shall not be less than one hundred and
ten percent (110%) of the Fair Market Value of the Common Stock on the
date the Award is granted; and (iii) with respect to any Option
repriced by the Committee, the exercise price shall be equal to the
Fair Market Value of the Common Stock on the date such Option is
repriced unless otherwise determined by the Committee. For purposes of
this Plan, Fair Market Value shall mean the average of the high and
low sales prices of the Common Stock as reported on the American Stock
Exchange, or if not reported on the American Stock Exchange, on the
principal securities exchange on which the Common Stock is listed, or
if not so listed, the high and low sales prices (or the average of the
high asked and low bid prices of the Common Stock if sales price
information is not reported) of the Common Stock as reported by the
Nasdaq Stock Market or, if not reported on the Nasdaq Stock Market, by
the NASD OTC Bulletin Board or similar quotation service. If the
Common Stock is not publicly traded, Fair Market Value shall be
determined in good faith by the Board of Directors.
(c) Duration of Options. The term of each Option granted to a Participant
pursuant to an Award shall be determined by the Committee; provided,
however, that in no case shall an Option be exercisable more than ten
(10) years (five (5) years in the case of an ISO granted to a
ten-percent stockholder as defined in (b) above) from the date of the
Award.
(d) Exercise of Options and Conditions. Except as otherwise provided in
Sections 16 and 17 herein, and except as otherwise provided below with
respect to ISOs, Options granted pursuant to an Award will become
exercisable at such time or times, and on and subject to such
conditions, as the Committee may specify at the time of the Award. The
Options may be subject to such restrictions, conditions and forfeiture
provisions as the Committee may determine, including, but not limited
to, restrictions on transfer, continuous service with the Company or
any of its subsidiaries, achievement of business objectives, and
individual, division and Company performance. To the extent
exercisable, an Option may be exercised either in whole at any time or
in part from time to time. With respect to an ISO granted to a
Participant, the Fair Market Value of the shares of Common Stock on
the date of grant which are exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000.
<PAGE>
(e) Payment for and Delivery of Stock. Full payment for shares of Common
Stock purchased will be made at the time of the exercise of the
Option, in whole or in part. Payment of the purchase price will be
made in cash or in such other form as the Committee may permit,
including, without limitation, delivery of shares of Common Stock.
7. STOCK APPRECIATION RIGHTS.
(a) Nature of Stock Appreciation Rights. A SAR is an Award entitling the
recipient to receive payment, in cash and/or shares of Common Stock,
determined in whole or in part by reference to appreciation in the
value of a share of Common Stock. A SAR entitles the recipient to
receive in cash and/or shares of Common Stock, with respect to each
SAR exercised, the excess of the Fair Market Value of a share of
Common Stock on the date of exercise over the Fair Market Value of a
share of Common Stock on the date the SAR was granted.
(b) Grant of SARs. SARs may be subject to Awards in tandem with, or
independently of, Options granted under the Plan. A SAR granted in
tandem with an Option which is not an ISO may be granted either at or
after the time the Option is granted. A SAR granted in tandem with an
ISO may be granted only at the time the ISO is granted and may expire
no later than the expiration of the underlying ISO.
(c) Exercise of SARs. A SAR not granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as
the Committee may specify. A SAR granted in tandem with an Option will
be exercisable only at such times, and to the extent, that the related
option is exercisable. A SAR granted in tandem with an ISO may be
exercised only when the market price of the shares of Common Stock
subject to the ISO exceeds the exercise price of the ISO, and the SAR
may be for no more than one hundred percent (100%) of the difference
between the exercise price of the underlying ISO and the Fair Market
Value of the Common Stock subject to the underlying ISO at the time
the SAR is exercised. At the option of the Committee, upon exercise,
an SAR may be settled in cash, Common Stock or a combination of both.
8. RESTRICTED STOCK.
A Restricted Stock Award entitles the recipient to acquire shares of Common
Stock, subject to certain restrictions or conditions, for no cash consideration,
if permitted by applicable law, or for such other consideration as may be
determined by the Committee. The Award may be subject to such restrictions,
conditions and forfeiture provisions as the Committee may determine, including,
but not limited to, restrictions on transfer, continuous service with the
Company or any of its subsidiaries, achievement of business objectives, and
individual, division and Company performance. Subject to such restrictions,
conditions and forfeiture provisions as may be established by the Committee, any
Participant receiving an Award of Restricted Stock will have all the rights of a
stockholder of the Company with respect to the shares of Restricted Stock,
including the right to vote the shares and the right to receive any dividends
thereon.
<PAGE>
9. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of Common Stock
to be delivered in the future. Delivery of the shares of Common Stock will take
place at such time or times, and on such conditions, as the Committee may
specify. At the time any Deferred Stock Award is granted, the Committee may
provide that the Participant will receive an instrument evidencing the
Participant's right to future delivery of Deferred Stock.
10. DIRECTOR'S FEES.
Subject to the limitation contained in Section 4 of this Plan on the number of
shares of Common Stock which may be issued pursuant to this Plan, any member of
the Board who provides written notice to the Company shall be entitled to
receive all or a portion of the member's annual board retainer fee, Board
meeting fees, and Board committee fees in the form of shares of the Company's
Common Stock. Any member of the Board who desires to receive all or any part of
such Board fees in shares of Common Stock must provide the Chief Financial
Officer of the Company with written notice of the member's election (an
"Election") to receive payment of Board fees in this form no later than five (5)
business days prior to the date of payment of such fees. Shares of Common Stock
with an aggregate Fair Market Value, on the date preceding the date of payment
of Board fees, equal to the aggregate amount of such Board fees shall be issued
to the Board member no later than fifteen (15) business days following the date
of payment of such Board fees by the Company.
11. FORMULA AWARDS.
On each date that (i) an individual who is not an employee of the Company or any
subsidiary is elected or reelected as a director by the shareholders of the
Company and (ii) that an annual meeting of shareholders of the Company is held
during the term of office of such director (but excluding any annual meeting at
which such director's term of office expires and such director is not reelected)
such director shall receive, on such date, a grant of Nonqualified Stock options
to acquire ten thousand (10,000) shares of Common Stock and each such Option
shall have a per share exercise price equal to the Fair Market Value of the
Common Stock on such date of grant. Each Nonqualified Stock Option granted to a
non-employee Director pursuant to this Section 11 shall have a term of five (5)
years from the date of grant and shall vest and become fully exercisable on the
first anniversary of such date of grant. In order for a non-employee Director to
be granted such Nonqualified Stock options, the Director must have attended
seventy-five (75%) of all Board meetings and seventy-five percent (75%) of all
Board committee meetings, of which the Director is a member, called and held
during the previous twelve (12) months while such Director was a member of the
Board and committees). Notwithstanding anything to the contrary set forth above,
no awards of Nonqualified Stock Options shall be made pursuant to this Section
11 to a Director who is receiving a comparable award under the Company's 1996
Equity Incentive Plan. The provisions of this Section 11 of the Plan shall not
be amended more than once every six (6) months, other than to comport with
changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act of 1974, or the rules thereunder.
<PAGE>
12. OTHER STOCK BASED AWARDS.
The Committee shall have the right to grant Other Stock Based Awards under the
Plan to Employees which may include, without limitation, the grant of shares of
Common Stock as bonus compensation and the issuance of shares of Common Stock in
lieu of an Employee's cash compensation.
13. AWARD AGREEMENTS.
The grant of any Award under the Plan may be evidenced by an agreement which
shall describe the specific Award granted and the terms and conditions of the
Award. Any Award shall be subject to the terms and conditions of any such
agreement required by the Committee.
14. TRANSFERS.
No Award (other than an outright Award in the form of Common Stock without any
restrictions) may be assigned, pledged or transferred other than by will or by
the laws of descent and distribution and, during a Participant's lifetime, will
be exercisable only by the Participant or, in the event of a Participant's
incapacity, by the Participant's guardian or legal representative.
15. RIGHTS OF A STOCKHOLDER.
Except as specifically provided by the Plan, the receipt of an Award will not
give a Participant rights as a stockholder of the Company. The Participant will
obtain such rights, subject to any limitations imposed by the Plan, or the
instrument evidencing the Award, upon actual receipt of shares of Common Stock.
16. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Common Stock pursuant
to the Plan or to remove any restrictions or legends from shares of Common Stock
previously delivered under the Plan until, (a) in the opinion of the Company's
counsel, all applicable federal and state laws and regulations have been
complied with, (b) until the shares of Common Stock to be delivered have been
listed or authorized to be listed on the American Stock Exchange (or such other
exchange or quotation system on which shares of Common Stock may be listed or
quoted), and (c) until all other legal matters in connection with the issuance
and delivery of such shares of Common Stock have been approved by the Company's
counsel. If the sale of shares of Common Stock has not been registered under the
Securities Act of 1933, as amended (the "Act"), and qualified under the
appropriate "blue sky" laws, the Company may require, as a condition to exercise
of the Award, such representations and agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and laws and may require
that the certificates evidencing such shares of Common Stock bear an appropriate
legend restricting transfer.
If an Award is exercised by a Participant's legal representative, the Company
will be under no obligation to deliver shares of Common Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
<PAGE>
17. TAX WITHHOLDING.
The Company will have the right to deduct from any cash payment under the Plan
taxes that are required to be withheld and to condition the obligation to
deliver or vest shares of Common Stock under this Plan upon the Participant's
paying the Company such amount as the Company may request to satisfy any
liability for applicable withholding taxes. The Committee may in its discretion
permit Participants to satisfy all or part of their withholding liability either
by delivery of shares of Common Stock held by the Participant or by withholding
shares of Common Stock to be delivered to a Participant upon the grant or
exercise of an Award.
18. ADJUSTMENT OF AWARD.
(a) In the event that a dividend shall be declared upon the Common Stock
payable in shares of Common Stock, the number of shares of the Common
Stock then subject to any Award and the number of shares of the Common
Stock which may be issued under the Plan but not yet covered by an
Award shall be adjusted by adding to each share the number of shares
which would be distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend. In the event that the
outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of Common Stock or
other securities of the Company or of another corporation or for cash,
whether through reorganization, recapitalization, stock split,
combination of shares, sale of assets, merger or consolidation in
which the Company is the surviving corporation, then, there shall be
substituted for each share of the Common Stock then subject to any
Award, the number and kind of shares of stock or other securities or
the amount of cash into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall be
exchanged.
(b) In the event of a proposal, which is approved by the Board, of any
merger or consolidation involving the Company where the Company is not
the surviving entity, any sale of substantially all of the Company's
assets or any other transaction or series of related transactions as a
result of which a single person or several persons acting in concert
own a majority of the Company's then outstanding Common Stock (such
merger, consolidation, sale of assets, or other transaction being
hereinafter referred to as a "Transaction"), all outstanding options
and SARs shall become exercisable immediately before or
contemporaneously with the consummation of such Transaction and each
outstanding share of Restricted Stock and each outstanding Deferred
Stock Award shall immediately become free of all restrictions and
conditions upon consummation of such Transaction. Immediately
following the consummation of the Transaction, all outstanding Options
and SARs shall terminate and cease to be exercisable.
In lieu of the foregoing, if the Company will not be the surviving
corporation or entity, the Committee may arrange to have such
acquiring or surviving corporation or entity, or an "Affiliate,, (as
defined below) thereof, grant replacement Awards which shall be
immediately exercisable to Participants holding outstanding Awards.
<PAGE>
The term "Affiliate," with respect to any Person, shall mean any other
Person who is, or would be deemed to be an "affiliate" or an
"associate" of such Person within the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934. The term "Person" shall mean a
corporation, association, partnership, joint venture, trust,
organization, business, individual or government or any governmental
agency or political subdivision thereof.
(c) In the event of the dissolution or liquidation of the Company (except
a dissolution or liquidation relating to a sale of assets or other
reorganization of the Company referred to in the preceding sections),
the outstanding options and SARs shall terminate as of a date fixed by
the Committee; provided, however, that not less than thirty (30) days
written notice of the date so fixed shall be given to each Participant
who shall have the right during such period to exercise the
Participant's Options or SARs as to all or any part of the shares of
Common Stock covered thereby. Further, in the event of the dissolution
or liquidation of the Company, each outstanding share of Restricted
Stock and each outstanding Deferred Stock Award shall immediately
become free of all restrictions and conditions.
19. TERMINATION OF SERVICE.
Upon a Participant's termination of service with the Company or a subsidiary (if
an employee only of a subsidiary), any outstanding Award shall be subject to the
terms and conditions set forth below, unless otherwise determined by the
Committee:
(a) In the event a Participant leaves the employ or service of the Company
or a subsidiary of the Company, prior to the Participant's 65th
birthday, whether voluntarily or otherwise but other than by reason of
the Participant's death or "disability" (as such term is defined in
Section 22(e)(3) of the Code), each Option and SAR granted to the
Participant shall terminate upon the earlier to occur of (i) the
expiration of the period three (3) months after the date of such
termination and (ii) the date specified in the Option or SAR;
provided, that, prior to the termination of such Option or SAR, the
Participant shall be able to exercise any part of the Option or SAR
which is exercisable as of the date of termination. Further, each
outstanding share of Restricted Stock and each outstanding Deferred
Stock Award which remains subject to any restrictions or conditions of
the Award shall be forfeited to the Company upon such date of
termination.
(b) In the event a Participant's employment with or service to the Company
or its subsidiaries terminates by reason of the Participant's death or
"disability" (as such term is defined in Section 22(e)(3) of the
Code), each Option and SAR granted to the Participant shall become
immediately exercisable in full and shall terminate upon the earlier
to occur of (i) the expiration of the period six (6) months after the
date of such termination and (ii) the date specified in the option or
SAR. Further, each outstanding share of Restricted Stock and each
outstanding Deferred Stock Award shall immediately become free of all
restrictions and conditions upon the date of such termination.
<PAGE>
(c) In the event a Participant voluntarily or involuntarily leaves the
employ or service of the Company or a subsidiary of the Company, after
the Participant's 65th birthday, each Option and SAR granted to the
Participant shall become immediately exercisable in full and shall
terminate upon the earlier to occur of (i) the expiration of three (3)
months after the date of such termination and (ii) the date specified
in the Option or SAR. Further, each outstanding share of Restricted
Stock and each outstanding Deferred Stock Award shall immediately
become free of all restrictions and conditions upon the date of such
termination.
20. AMENDMENTS AND TERMINATION.
The Committee will have the authority to make such amendments to any terms and
conditions applicable to outstanding Awards as are consistent with this Plan;
provided, that, except for adjustments under Section 16 hereof, no such action
will modify such Award in a manner adverse to the Participant without the
Participant's consent except as such modification is provided for or
contemplated in the terms of the Award.
The Board may amend, suspend or terminate the Plan, subject to shareholder
approval if so required by any applicable federal or state securities laws, tax
laws or corporate statute, except that no action may, without the consent of a
Participant, adversely affect any Award previously granted to the Participant
under the Plan.
21. SUCCESSORS AND ASSIGNS.
The provisions of this Plan shall be binding upon all successors and assigns of
any such Participant including, without limitation, the estate of any such
Participant and the executors, administrators, or trustees of such estate, and
any receiver, trustee in bankruptcy or representative of the creditors of any
such Participant.
22. MISCELLANEOUS.
(a) This Plan shall be governed by and construed in accordance with the
laws of the State of New Jersey.
(b) Any and all funds received by the Company under the Plan may be used
for any corporate purpose.
(c) Nothing contained in the Plan or any Award granted under the Plan
shall confer upon a Participant any right to be continued in the
employment of the Company or any subsidiary, or interfere in any way
with the right of the Company, or its subsidiaries, to terminate the
employment relationship at any time.
EXHIBIT 10.11
OPTION GRANT AGREEMENT
July 19, 1999
Mr. Kenneth D. Hill
167 Anchor Drive
Vero Beach, FL 32963
Dear Mr. Hill:
In recognition of your duties, obligations and responsibilities in connection
with your employment as Chief Executive Officer of iAW, Inc., a wholly owned
subsidiary of Calton, Inc. ("Calton" or the "Company"), and as an inducement for
you to acquire a significant financial interest in Calton, the Company hereby
grants to you non-qualified option (the "Option") to purchase all or any part of
an aggregate of 600,000 shares of its common stock, $.01 par value, on the terms
and conditions set forth in this Agreement (the "Option Agreement").
As used in this Option Agreement, the following terms shall have the following
respective meanings:
(a) "Appreciation Rights Election" means the method of exercising an Option
pursuant to which shares of Common Stock subject to the Option are sold to cover
the payment to the Company of the Option's aggregate exercise price and the
payment of fifty percent (50%) of the Appreciated Value in cash to the
Participant, with the Participant receiving the remaining fifty percent (50%) of
the amount of the Appreciated Value in shares of Common Stock (as such,
proportion may be adjusted by the Committee pursuant to Section 6 below).
(b) "Appreciated Value" means an amount equal to the difference between the
aggregate fair market value of the shares of Common Stock subject to the Option
and the aggregate exercise price of the Option on the date of exercise. For
purposes of this definition, fair market value of the shares of the Common Stock
shall be the price at which such shares are sold on the date of exercise.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means (a) an event or series of events by which any
"person" (as such term is defined in Section 2(2) of the Securities Act of 1933,
as amended), or any affiliate of such Person (when applied to any Person, an
affiliate shall mean any other Person directly or indirectly controlling,
controlled by, or under common control with that Person), or Persons and
affiliates of such Persons acting in concert, shall, whether in a single
transaction or a series of related transactions, acquire directly or indirectly
an amount of the Company's voting stock representing thirty-five percent (35%)
or more of the total voting power of the outstanding voting securities of the
Company having the right under ordinary circumstances to vote in an election of
the Board, or (b) the consummation of a merger, reorganization or
recapitalization in which the
<PAGE>
Company is the surviving entity, and in which, after the consummation of the
transaction, the shareholders of the Company immediately prior to the
consummation of the transaction shall not continue to beneficially own
securities representing sixty-five percent (65%) or more of the total voting
power of the outstanding voting securities of the Company having the right under
ordinary circumstances to vote in an election of the Board.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
(f) "Committee" means the Compensation Committee of the Board, all of the
members of which shall be "disinterested persons" as defined in Rule 16b-3 (c)
(2) (i) under the Securities Exchange Act of 1934, as amended, or any similar
successor rule, and "outside directors" as defined in proposed rule 1.162-27 (e)
(3) under the Code or any final or similar successor rule.
(g) "Corporate Transaction" means a transaction such as a merger (other
than a merger intended solely to change the Company's jurisdiction of
incorporation), consolidation, reorganization, recapitalization, or sale of all
or substantially all of the Company's assets (other than a sale of assets to a
Subsidiary or other affiliated entity of the Company).
(h) "Director" shall mean a member of the Company's Board.
(i) "Exercise Sell" means the method of exercising an Option pursuant to
which shares of Common Stock subject to the Option are sold to cover payment of
the Option's aggregate exercise price.
(j) "Fair Market Value" means the arithmetic average of the highest and
lowest sales prices of the Common Stock reported by the American Stock Exchange
on a particular date, or if there is no sale on such date, then the average of
such high and low sales prices on the last previous date on which a sale of the
Common Stock is reported.
(k) "Just Cause" shall mean: (i) your conviction for a felony or for fraud;
(ii) your engagement in any conduct, by way of act or omission, which in the
opinion of the Board has the potential to cause, or does cause, a material
adverse effect on the Company's business; (iii) your failure to return from
authorized leave from the Company; (iv) you being found to be under the
influence of, or to have distributed, any illegal narcotic substance while on
the Company's premises, including any project site of the Company; (v) you
acting dishonestly or committing theft of Company property; or (vi) your work
performance failing to meet Company standards.
(l) "Plan" means the Calton, Inc. 1996 Equity Incentive Plan.
(m) "Tax Withholding Amount" means the amount, if any, which, upon the
exercise of an Option or an election by you under Section 83(b) of the Code, the
Company or a Subsidiary may be required to withhold in order to obtain a federal
and/or state income tax deduction, such amount which shall be paid to the
Company by you.
(n) "Tender Offer" means a tender offer for fifty percent (50%) or more of
the Company's voting stock regardless of whether or not the Company will
continue as a separate entity upon the consummation of the Tender Offer.
2
<PAGE>
Purchase Price. The purchase price for the Shares covered by this Option
Agreement is $1.63 per share.
Provisions of Plan. Although this Option is not being granted pursuant to
the Company's 1996 Equity Incentive Plan ("the Plan"), it is intended to have
terms consistent with Nonqualified Stock Options (as defined in the Plan)
granted under the Plan. Except as provided in Section 4 below, to the extent
that this Option Agreement contains any provisions inconsistent with the
provisions of the Plan, such provisions shall be deemed modified and amended to
be consistent with the terms of the Plan.
Term and Vesting of Option. The effective date of the Option is July 19,
1999 and the Option shall expire on, and may not be exercised after July 19,
2009, subject to Section 4 below. The Option shall vest and become exercisable,
cumulatively, in three (3) equal, annual installments so that, of the Shares
subject to the Option, one-third of the Option, representing 200,000 Shares may
be exercised in whole or in part at any time after July 19, 2000; one-third of
the Option representing 200,000 Shares, may be exercised in whole or in part at
any time on or after July 19, 2001; and one-third of the option, representing
200,000 Shares may be exercised in whole or in part at any time on or after July
19, 2002. To the extent that any installment of the Option becomes exercisable,
it may thereafter be exercised in whole or in part at any time prior to the
expiration or termination of the Option.
Shareholder Approval of Options Being Granted. If the rules of the American
Stock Exchange, which require shareholder approval of the grant of options with
respect to more than five percent (5%) of Calton's outstanding Common Stock in
connection with certain transactions (the "AMEX Rule"), would require
shareholder approval of the grant of any portion of the Options granted to you
pursuant to this Option Agreement and/or the options granted to Matthew Smith
and Robert Hill pursuant to agreements (the "Aggregate Options") with Employer
as of even date herewith, then
(i) the grant of a number of options equal to one-third (1/3) of the
Aggregate Options which require shareholder approval under the AMEX Rule
shall be subject to Calton shareholder approval;
Calton agrees to submit a proposal to obtain the required shareholder approval
at its next meeting of shareholders; and in the event that the required
shareholder approval is not obtained, Calton and you agree to negotiate in good
faith to develop an equitable substitute for the Options forfeited by reason of
the failure to obtain shareholder approval.
Limitations on Exercise of Option. Pursuant to the Plan, the Employee shall
be prohibited from selling more than fifty percent (50%) of the aggregate number
of shares of Common Stock underlying the Options without the written consent of
Calton until July 19, 2001.
Exercise of Option. An Option may be exercised only by a written notice of
intent to exercise such Option with respect to a specific number of shares of
Common Stock subject to such Option and payment to the Company of the aggregate
amount of the exercise price for the number of shares of Common Stock so
specified in the notice. Payment of the Option's exercise price can be made in
cash, by cashier's check or certified bank check, in kind by the delivery of
shares of Common Stock having a Fair Market Value on the date preceding the date
of exercise equal to the portion of the option price so paid and which have been
owned and held by you for a period not less than six (6) months. Upon receipt of
written notice evidencing your intent to
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exercise an Option, or an election by you under Section 83(b) of the Code, the
Company will inform you of the amount of the Tax Withholding Amount, if any,
which you shall be required to remit to the Company before the shares of Common
Stock will be issued to you.
With respect to Options granted under the Plan and held by you for six (6)
months or longer, you can also pay all or part of such Option's exercise price
pursuant to the Exercise Sell or Appreciation Rights Election methods; provided,
however, that if you choose to pay all or part of the exercise price pursuant to
the Appreciation Rights Election method, the Committee shall have the sole
discretion to determine the form in which payment of the Appreciated Value will
be made to you, including all cash, all shares of Common Stock or any other
combination thereof. Fractional shares will not be issued to you when exercising
an Option pursuant to the Appreciation Rights Election method. The value of any
fractional shares shall be paid in cash to you.
The shares of Common Stock to be sold in order to pay (i) the exercise
price under the Exercise Sell method or (ii) the exercise price and amount of
the cash payment of the Appreciated Value under the Appreciated Rights Election
method shall be sold by or on behalf of you in an open market transaction on the
date of exercise and you shall not be liable for any cost of such sale. If you
elect to exercise an Option pursuant to the Exercise Sell or Appreciation Rights
Election method, then the Tax Withholding Amount, if any, shall, in your
discretion, also be covered by the sale of shares of Common Stock subject to the
Option being exercised. You shall be entitled to receive any remaining proceeds
from the sale of shares of Common Stock which are not applied against the
exercise price and Tax Withholding Amount under the Exercise Sell method, or the
exercise price, cash portion of the Appreciated Value and the Tax Withholding
Amount under the Appreciation Rights Election method.
Capital Stock Changes or Corporate Events. In the event there is any change
in the capital stock of the Company pursuant to a stock split, share
combination, stock dividend or Corporate Transaction in which the Company is the
surviving entity, except as otherwise provided in the paragraph below, each
outstanding Option shall apply to the securities to which a holder of the number
of shares of Common Stock subject to an Option shall be entitled to receive in
connection with any such transaction. The Committee shall also have the
discretion to make any other changes to an Option, including, without
limitation, additional changes in the number or character of the shares of
Common Stock subject to an Option, or in the exercise price of an Option, in
order to protect such Option from dilution or diminution in value upon the
occurrence of any of the above transactions.
In the event of a Corporation Transaction in which the Company is not the
surviving entity, or a Corporate Transaction in which the Company is the
surviving entity and in which the outstanding shares of Common Stock shall be,
pursuant to the operation of law or terms of the Corporation Transaction,
changed into or exchanged for securities of another corporation, interests in a
noncorporate entity, other property (including cash), or any combination of the
foregoing, you can elect within thirty (30) days of receipt of notice of such
Corporate Transaction to accelerate all unvested Options and exercise them or
any part thereof. Your exercise of any Options and the issuance of shares of
Common Stock to you in connection with any such Corporation Transaction shall be
conditioned upon the consummation of the Corporate Transaction; provided,
however, that such condition shall not preclude you from receiving, with respect
to the shares of Common Stock issuable upon the exercise of such Option, the
consideration issuable or payable in respect of the shares of Common Stock
pursuant to such Corporation Transaction. If, in exercising an Option as a
result of a Corporate Transaction, the
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Exercise Sell or Appreciation Rights Election method is not available to you for
any reason including, without limitation, the absence of a trading market for
the Common Stock on the date of consummation of the Corporation Transaction, you
shall be entitled to receive, without the payment of consideration, the number
of shares of Common Stock issuable upon exercise of the Option less the number
of shares having an aggregate Fair Market Value equal to the aggregate exercise
price on the date the election to exercise the Option is made by you.
In the event of a Tender Offer, all of the Options shall become immediately
exercisable, and may be exercised at any time prior to the expiration date of
such Options. Alternatively, within ten (10) days of receiving notice of the
commencement of a Tender Offer, you can provide the Company with written notice
that the Company shall repurchase all of the Options, whether exercisable or
not, for an amount equal to the difference between the highest aggregate Fair
Market Value of the shares of Common Stock subject to the Options for the period
commencing with the date of public announcement of the Tender Offer and ending
with the effective date of the Tender Offer and the aggregate exercise price of
the Options. The Company's obligation to repurchase the Options shall be subject
to any restriction, limitation, or prohibition contained in any agreement to
which the Company is a party.
In the event of a Change in Control, all of the Options shall become
immediately exercisable and may be exercised at any time prior to the expiration
dates of such Options. Alternatively, within ten (10) days of receipt of notice
from the Company of a Change in Control, such notice which shall be furnished
promptly upon the Company receiving notice thereof, you can provide the Company
with written notice that the Company shall repurchase all of the Options,
whether exercisable or not, for an amount equal to the difference between the
aggregate Fair Market Value of the shares of Common Stock subject to the Options
on the date of the Change in Control and the aggregate exercise price of the
Options. The Company's obligation to repurchase the Options shall be subject to
any restriction, limitation or prohibition contained in any agreement to which
the Company is a party.
In the event of the dissolution or liquidation of the Company (except a
dissolution or liquidation relating to a sale of assets or other reorganization
of the Company referred to in the first paragraph of this Section), all of the
outstanding Options shall terminate as of a date fixed by the Committee;
provided, however, that not less than thirty (30) days written notice of the
date so fixed shall be given to you, and you shall have the right during such
period to exercise all of your outstanding Options, whether exercisable or not.
Notwithstanding the exercise provisions in the preceding paragraphs of this
Section, if the Company's legal counsel should determine that an extension of
time for the exercise of any Option is necessary in order to allow you to
acquire the shares of Common Stock subject to the Option in compliance with
federal and state securities laws, the Committee shall extend said time of
exercise for whatever additional period of time is necessary, in counsel's
judgment, to allow such compliance.
Termination.
Death and Disability. In the event the employment relationship between you
and the Company or any of its Subsidiaries is terminated by reason of your death
or "disability" (as such term is defined in Section 22 (e) (3) of the Code), all
of the Options shall become immediately exercisable. You, or your designated
beneficiary or estate, shall have two (2) years from such date of termination to
exercise all or any part of a Nonqualified Stock Option.
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Resignation. If you resign as an employee from the Company or any
Subsidiary, you shall have one (1) year for a Nonqualified Stock Option, from
such date of termination to exercise all or any part of such Option which is
fully vested on or before the date of termination.
Without Cause by Company. In the event that you have been employed by the
Company or a Subsidiary for one (1) year or more, and your employment is
terminated by the Company for any reason other than for Just Cause, each Option,
or any part thereof, scheduled to vest on the succeeding anniversary date of the
grant of the Option following the date of termination shall become immediately
exercisable, and you shall have two (2) years from the date of termination to
exercise all or any part of a Nonqualified Stock Option. If you have been
employed by the Company or a Subsidiary for less than one (1) year, you shall
have thirty (30) days, or seven (7) months if you are an officer, Director or
more than ten percent (10%) beneficial owner of the Company, from the date of
such termination in which to exercise all or part of those Options which are
fully vested on or before such date of termination.
Just Cause by Company. If you are terminated by the Company for Just Cause,
you shall have thirty (30) days, or seven (7) months if you are an officer,
Director, or ten percent (10%) beneficial owner of the Company, from the date of
termination to exercise all or part of those Options which are fully vested on
or before the date of termination.
Non-Transferability of Option. No Option shall be transferable (including
pledged or encumbered) by you otherwise than by will or by the laws of descent
and distribution, and each Option shall be exercisable during your lifetime only
by you.
Governing Law and Jurisdiction. This Option Agreement shall be construed
and the respective provisions enforced and administered in accordance with the
laws of the State of New Jersey. All disputes which may arise under this Option
Agreement or the Plan which involve judicial adjudication shall be resolved in a
court of competent jurisdiction of the State of New Jersey or the United States
District Court for the District of New Jersey. You consent and agree to submit
to the personal jurisdiction of the aforesaid courts and to notify Calton of any
change of your address within sixty (60) days of the date of such change.
Furthermore, you consent to service of any papers, notices or process necessary
or proper for any legal action in any manner permitted by the New Jersey Court
Rules as they exist on the date that the Option is granted or are thereafter
amended, including, without limitation, service by registered mail or certified
mail, return receipt requested, or, in the event you refuse to accept or claim
registered or certified mail, ordinary mail to your last known address. In the
event that you fail to notify Calton of a change of address and service by
registered or certified mail as aforesaid is not accepted or claimed, such
failure shall be deemed a refusal to accept or claim service of process by
registered or certified mail. You hereby acknowledge the sufficiency of service
as aforesaid and waive any right that you may have to challenge the sufficiency
of such service or to challenge in any manner the convenience of the location or
the venue of any legal action brought involving this Option Agreement.
Benefit and Severability. The agreements contained herein shall bind and
benefit the successors and assigns of Calton and your executors, administrators,
receiver, trustee in bankruptcy or representative of your creditors and assigns
as herein provided.
Except as otherwise provided herein or in the Plan, if any term, covenant,
condition or provision of this Option Agreement or of the Plan or the
application thereof to any person or circumstance shall, at any time or to any
extent, be invalid or unenforceable, the remainder of
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this Option Agreement or of the Plan or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term,
covenant, condition and provision of this Option Agreement or of the Plan shall
be valid and be enforced to the fullest extent permitted by law.
Construction. The Option and this Option Grant Agreement shall not be
construed as a contract of employment, nor constitute an assurance of continued
employment for any period, between you and the Company.
Registration Statement. The Company shall take any reasonable and
appropriate action which is necessary, including, without limitation, the filing
of a Form S-8 Registration Statement with the Securities and Exchange
Commission, to effect the registration of the shares of Common Stock reserved
for issuance under this Plan under the Securities Act of 1933, as amended.
Very truly yours,
CALTON, INC.
By: -------------------------------
ANTHONY J. CALDARONE, PRESIDENT
By the execution hereof,
I hereby agree to comply
with and be bound by the terms
and provisions hereinabove set forth.
- -------------------------------------
KENNETH D. HILL
7
EXHIBIT 10.12
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Employment and Non-Competition Agreement dated as of July 19, 1999, between
Calton Homes of Florida, Inc., a Florida corporation (the "Employer"), Calton,
Inc., a New Jersey corporation ("Calton"), and Kenneth D. Hill, an individual
residing at 167 Anchor Drive, Vero Beach, Florida 32963 (the "Employee").
W I T N E S S E T H:
WHEREAS, pursuant to the Asset Purchase Agreement among Employer, Calton,
iAW, Inc. ("iAW"), Employee, Matthew Smith and Robert Hill dated as of July 19,
1999 (the "Asset Purchase Agreement"), Employer is acquiring substantially all
of the assets of iAW (the "Acquisition");
WHEREAS, the employment of the Employee by the Employer from and after the
Acquisition is a material inducement to Calton's willingness to acquire iAW
through the Acquisition;
WHEREAS, the Employee possesses valuable knowledge and skills that will
contribute to the successful operation of the Employer's business;
WHEREAS, the Employer and the Employee have agreed to execute and deliver
this Agreement in consideration of, among other things, (i) the access of the
Employee to confidential or proprietary information of the Employer and other
corporations, associations, partnerships, unincorporated organizations or other
similar entities that are presently or will be in the future directly or
indirectly owned or controlled by Calton (collectively, the "Calton Group"),
(ii) the access of the Employee to confidential or proprietary information to be
acquired hereafter by the Calton Group and (iii) the Employee's receipt of
compensation from time to time by the Employer; and
WHEREAS, the Employer desires that the Employee be employed by the Employer
in an executive capacity and the Employee desires to be so employed, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Employment. The Employer hereby employs the Employee, and the Employee
hereby accepts employment with the Employer, for the term set forth in Section
2, in the position and with the duties and responsibilities set forth in Section
3, and upon the other terms and subject to the conditions hereinafter stated.
2. Employment Period. This Agreement shall become effective and commence on
the date hereof and shall continue until June 30, 2002 (the "Employment Period")
or such earlier date as of which this Agreement shall be terminated in
accordance with the provisions of Section 6.
<PAGE>
3. Position, Duties, Responsibilities. At all times during the Employment
Period, the Employee shall serve as Chief Executive Officer of the Employer with
responsibility for managing the affairs of the corporation or in such other
executive capacity as shall from time to time be assigned to him by the Board of
Directors of the Employer (the "Board"), provided that any such reassignment is
to a senior executive position. The Employee shall report to such person as the
Board may determine from time to time. The Employee agrees, during the
Employment Period, to endeavor to the best of his ability to promote the
interests of the Employer, and in particular, without limitation, to devote his
full time and best efforts and attention to the business of the Employer, and to
carry out such other duties and perform such other responsibilities as may from
time to time be assigned to him.
4. Remuneration. In consideration of all the services to be rendered by the
Employee, the Employee shall be paid an annual fixed salary (the "Base Salary")
as follows:
(a) During the period commencing on the date of this Agreement and
ending on the six month anniversary of the date of this Agreement, the
Employee's Base Salary shall be $75,000 per annum ($6,250 per month);
(b) During the period commencing on the day following the six month
anniversary of the date of this Agreement and ending on the 18 month anniversary
of the date of this Agreement, the Employee's Base Salary shall be $120,000 per
annum ($10,000 per month); and
(c) Prior to the 18 month anniversary of the date of this Agreement,
Employer and Employee shall negotiate, in good faith, based upon market rates,
the Employee's Base Salary for the remaining term of this Agreement, taking into
account, the performance of and prospects for the Company.
(d) Employee shall have the opportunity to earn a performance bonus as
determined in the discretion of the Board of Directors of Employer and
consistent with Calton's policies.
The Employer shall pay the Employee the Base Salary on such dates as employees
of the Employer are ordinarily paid, and shall deduct from the Base Salary
applicable withholding taxes.
5. Benefits.
(a) Calton agrees that during the Employment Period, the Employee shall
be eligible to participate in each benefit plan available, or hereafter made
available, to employees of Employer and shall be entitled to participate in an
incentive compensation program attributable to Employer's results that is
similar to Calton's Incentive Compensation Plan (a copy of which has been
delivered to Employee), subject, in the discretion of the Calton Board of
Directors, to adjustments to reflect the start-up nature of the Employer's
business. The Employer and/or Calton may amend or terminate any such plan in its
sole and absolute discretion.
(b) During the Employment Period, the Employee shall be entitled to
fifteen (15) days paid vacation per annum. Any unused vacation shall not carry
over to the succeeding year unless vacation is deferred at the request of the
Employer. Such vacation must be taken at times approved by Calton and the
Employer.
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(c) All expenses reasonably incurred by the Employee in the performance
of services to the Employer during the Employment Period shall be reimbursed
upon production of receipts for such expenses in accordance with Calton's
policies and procedures, as the same may be amended from time to time, and the
approval of the Employer, such approval not to be unreasonably withheld.
(d) Upon the execution and delivery of this Agreement, Employee shall be
granted options (the "Options") to acquire 600,000 shares of Calton Common
Stock. The Options shall have the following terms:
(i) the exercise price shall be $1.63 per share;
(ii) the Options shall vest in equal one-third (1/3) annual
installments on July 19, 2000, 2001 and 2002;
(iii) until July 19, 2001, Employee shall be prohibited from selling
more than 50% of the aggregate number of shares of Common Stock underlying the
Options without the written consent of Calton;
(iv) Calton shall register the shares of Common Stock underlying the
Options under the Securities Act of 1933, as amended, on Form S-8 or a similar
form;
(v) the terms of the Options shall be consistent with the terms of
Calton's 1996 Equity Incentive Plan;
provided, however, that if the rules of the American Stock Exchange, which
require shareholder approval of the grant of options with respect to more than
five percent (5%) of Calton's outstanding Common Stock in connection with
certain transactions (the "AMEX Rule"), would require shareholder approval of
the grant of any portion of the options granted to Employee pursuant to this
Agreement and/or the options granted Matthew Smith and Robert Hill pursuant to
employment agreements (the "Aggregate Options") with Employer as of even date
herewith, then
(i) the grant of a number of options equal to one-third (1/3) of the
Aggregate Options which require shareholder approval under the AMEX Rule shall
be subject to Calton shareholder approval;
(ii) Calton agrees to submit a proposal to obtain the required
shareholder approval at its next meeting of shareholders; and
(iii) in the event that the required shareholder approval is not
obtained, Calton and Employee agree to negotiate in good faith to develop an
equitable substitute for the Options forfeited by reason of the failure to
obtain shareholder approval.
6. Termination, Death and Disability.
(a) Termination for Cause. Notwithstanding anything herein to the
contrary, Calton and/or the Employer shall have the right to immediately
terminate the employment of the Employee at any time during the Employment
Period if (i) the Employee shall have materially violated any of the provisions
of this Agreement (including, without limitation, any action by the Employee
which results or is reasonably expected to result in a violation of Sections 3,
7, 8, 9,
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10, 11 or 12) (ii) the Employee shall have been guilty of any action during his
employment hereunder involving willful malfeasance or gross negligence; or (iii)
the Employee shall have been convicted of or entered a plea of nolo contendere
to any felony. In the event of the termination of the Employee's employment
pursuant to this Section 6(a) the Employee shall not be entitled to any
severance payments or benefits hereunder.
(b) Termination Without Cause. If the Employee's employment with the
Employer is terminated by Calton and/or the Employer prior to the expiration of
the Employment Period other than for (i) death, (ii) Disability, (iii)
retirement or (iv) termination pursuant to Section 6(a), the Employer shall pay
the Employee the severance amount as set forth in Section 6(d)(i) or 6(d)(ii),
as the case may be.
(c) Termination for Failure to Achieve Plan. Calton and/or the Employer
shall have the right to terminate the employment of Employee if during any
fiscal year, Employer's net operating profit (as determined in accordance with
generally accepted accounting principles) is less than 65% of the amount
forecast in the Business Plan which was delivered by Employer to Calton prior to
the execution and delivery of the Merger Agreement.
(d) Severance Amount.
(i) The severance amount payable in the event of a termination of
the Employee's employment by the Employer pursuant to Section 6(b) shall be an
amount equal to the Employee's Base Salary (as in effect immediately preceding
the Employee's termination) for the then remaining term of the Employment
Period. In addition, Employee shall be entitled to receive any (a) incentive or
bonus compensation that has been awarded but not paid and (b) any stock options
that have been awarded but not issued.
(ii) The severance amount payable in the event of a termination of
the Employee's employment by Calton and/or the Employer pursuant to Section 6(c)
shall be three month's Base Salary (as in effect at the time of termination).
(iii) In the event that Employee's employment with Employer is
extended beyond the Employment Agreement and such employment is subsequently
terminated by Calton and/or the Employer for any reason other than for (a)
death, (b) Disability, (c) retirement, or (d) a reason set forth in Section 6(a)
or 6(c), the severance amount shall be an amount equal to six month's Base
Salary (as in effect at the time of termination).
(iv) The severance amount shall be paid in approximately equal
installments on such dates as employees of the Employer are normally paid,
except that, (x) such installment payments shall cease if the Employee fails to
comply with any of the covenants contained in Sections 7, 8, 9, 10, 11 or 12 of
this Agreement and (y) the Employer may elect, at any time and in its
discretion, to pay the Employee the remaining severance amount payable hereunder
in a single lump sum amount.
(e) Death. In the event of the death of the Employee during the
Employment Period, the Employee's estate shall be entitled to receive the
payment of salary pursuant to Section 4 with respect to periods prior to such
death and all monies then due under any insurance, retirement or other benefit
plan of the Employer in which the Employee participated.
(f) Disability. The Employee's employment hereunder may, in the
discretion of Calton and/or the Employer, be terminated in the event of his
Disability, for a period of (i) three
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consecutive months or (ii) more than six months in any twelve-month period. For
purposes of this section, "Disability" shall mean any illness or injury or
physical or mental condition which shall prevent the Employee from performing
his usual duties and services for the Employer on substantially the same basis
under which he was performing or was obligated to perform them prior to the
occurrence or onset of such illness, injury or condition. In the event of the
termination of Employee's employment pursuant to this Section 6(f), the Employee
shall not be entitled to any severance payments or benefits hereunder.
(g) Continuation of Benefits. In the event of a termination of
Employee's employment by the Employer pursuant to Section 6(b) or 6(c), then, to
the extent the Employee is insurable, the Employer shall reimburse the Employer
the cost of COBRA benefits, other than long term disability coverage (if any),
for the Employee for a period equal to (i) the remaining term of the Employment
Period in the event of a termination pursuant to Section 6(b) or (ii) three
months in the event of a termination pursuant to Section 6(c), subject to any
limitation on the provision of such benefits established by then existing law.
(h) Full Discharge of Employer Obligations. The amounts payable and
benefits provided to Employee pursuant to this Section 6 following termination
of the Employee's employment (including (i) Base Salary payable pursuant to
Section 4 for services rendered by the Employee prior to the date of termination
of his employment, (ii) vested benefits and expense reimbursements payable to
the Employee in accordance with the terms of any benefit plan or policy in which
the Employee participated during the Employment Period pursuant to Section 5 and
(iii) incentive or bonus compensation that has been awarded but not paid and any
stock options that have been awarded but not issued as per Section 6(d)) shall
be in full and complete satisfaction of the Employee's rights under this
Agreement and any other claims with respect to compensation and benefits the
Employee may have in respect of the Employee's employment by the Employer,
including any claim for incentive compensation. Such amounts shall constitute
liquidated damages with respect to any and all such rights and claims and, upon
the Employee's receipt of such amounts, the Employer shall be forever released
and discharged from any and all liability to the Employee in connection with
this Agreement or otherwise in connection with the Employee's employment with
the Employer.
(i) Survival. The obligations of the Employee to the Employer under
Sections 7, 8, 9, 10, 11 or 12 and 16 shall in any event survive any termination
of the Employee under this Section 6 or any termination of this Agreement. The
delivery of a notice of termination under this Section 6 shall cause all
obligations of the Employer to the Employee hereunder to cease, except for the
following obligations which shall survive termination: (i) the payment of any
accrued but unpaid Base Salary as at the date of termination and (ii) the
payment of the severance compensation, if any, pursuant to Section 6(d).
7. Employee's Acknowledgements.
(a) The Employee acknowledges and agrees that: (i) in the course of the
Employee's employment by iAW he has acquired and developed confidential
information related to iAW and during the course of Employee's employment with
Employer, he will continue to acquire and develop confidential information
relating to the Employer, and will acquire and develop confidential information
relating to the Calton Group or individual members thereof and the businesses of
Employer, the Calton Group or individual members thereof, including but not
limited to information concerning the Employer's and other Calton Group member's
sales, sales volume, sales methods, sales proposals, trade secrets, customers
and prospective customers,
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identity of customers and prospective customers, identity of key purchasing
personnel or other decision-makers in the employ of customers and prospective
customers, amount or kind of customers' purchases from the Employer and such
members, knowledge of customers' specifications and requirements, confidential
information of customers, pricing information, the Employer's and other Calton
Group members' sources of supply and material specifications, the Employer's and
other Calton Group members' computer programs, system documentation, special
hardware, product hardware, related software development, manuals, formulations,
processes, methods, equipment, compositions, ideas, improvements, inventions or
other confidential or proprietary information belonging to the Employer, the
Calton Group or any member thereof, or relating to the Employer's, the Calton
Group's or any member's affairs (collectively referred to herein as the
"Confidential Information"); (ii) the Confidential Information (including
Confidential Information pertaining to iAW) is the property of the Employer, the
Calton Group or a member thereof; (iii) the use, misappropriation or disclosure
of the Confidential Information would constitute a breach of trust and could
cause irreparable injury to the Employer, the Calton Group or a member thereof;
(iv) it is essential to the protection of the Employer's and the other Calton
Group members' good will and to the maintenance of the Employer's and the other
Calton Group members' competitive position that the Confidential Information be
kept secret and that the Employee not disclose the Confidential Information to
others outside the Calton Group or use the Confidential Information to the
Employee's own advantage or the advantage of others outside the Calton Group;
and (v) the covenants in Sections 7, 8, 9, 10, 11, 12 and 16 are necessary to
protect the legitimate interests of the Employer and the Calton Group.
(b) The Employee further recognizes and agrees that the Employee's
duties for the Employer may include the preparation of materials, including
written or graphic materials for the Employer or another Calton Group member,
and that any such materials conceived or written by the Employee shall be done
within the scope of his employment as a "work made for hire", as defined and
used in the Copyright Act of 1976, as amended (17 U.S.C. ss.ss. 101 et seq.).
The Employee agrees that because any such work is a "work made for hire", the
Employer or such other Calton Group member will solely retain and own all rights
in said materials, including rights of copyright.
(c) The Employee represents and warrants to the Employer that the
Employee has no prior obligation or commitment, whether written or oral, to any
third party that (i) relates to the protection of confidential information, the
solicitation of customers, suppliers, employees or sales representatives, the
ownership of inventions or improvements made or conceived by the Employee acting
individually or jointly, or the restriction of the employee's future activities
or employment or (ii) restricts the Employee's ability to perform the duties of
his employment for the Employer or any other member of the Calton Group,
including but not limited to the performance of or compliance with any of the
covenants of the Employee contained in any of Sections 7, 8, 9, 10, 11 and 15 of
this Agreement. The Employee certifies that he has not, and covenants that he
will not, disclose or use during his employment with the Employer or any other
member of the Calton Group any confidential information which the Employee
acquired as a result of any previous employment.
8. Intellectual Property Rights. The Employee agrees to disclose and assign
to the Employer his entire right, title and interest in and to all inventions
and improvements related to the Employer's business (including but not limited
to all financial and sales information), whether patentable or not, whether made
or conceived by him individually or jointly with others at any time during his
employment with the Employer or any other member of the Calton Group
6
<PAGE>
hereunder or with iAW prior to the term hereof. Such inventions and improvements
are to become and remain the property of the Employer or such other Calton Group
member whether or not patent applications are filed thereon, and the Employee
agrees, upon request and at the expense of the Employer, to make and execute
applications for letters patent, in the United States and any other countries,
through attorneys designated by the Employer, and to assign all applications and
patents which may issue thereon to the Employer or such other Calton Group
member or their respective nominees and to make all such other applications and
execute all such documents as the Employer may reasonably request to effectuate
the purpose of this Section 8. The Employer shall determine, in its reasonable
judgment after consulting with the Employee, whether any invention or
improvement is related to the business of the Employer.
9. Non-Disclosure of Confidential Information. The Employee agrees to hold
and safeguard the Confidential Information in trust for the Employer or any
Calton Group Members and the Calton Group, their successors and assigns and
agrees that the Employee shall not, without the prior written consent of the
Employer, use for personal gain or private purposes or misappropriate or
disclose or make available to anyone for use outside the Employer's or any
Calton Group members' organization at any time, either during the Employee's
employment with the Employer or any other member of the Calton Group or
subsequent to the termination of such employment with the Employer for any
reason, including without limitation termination by the Employer for cause or
without cause, any of the Confidential Information, whether or not developed by
the Employee, except as required in the performance of the Employee's duties to
the Employer or any other member of the Calton Group.
10. Covenant Not To Compete. The Employee covenants and agrees that during
the Employee's employment with the Employer or any other member of the Calton
Group and until the later of the fourth anniversary (second anniversary in the
case of a termination pursuant to Section 6(c)) of the termination of the
Employee's employment with the Employer or the Calton Group by reason of
resignation or pursuant to Section 6(a) or 6(c) of this Agreement, Employee
shall not, directly or indirectly, have any ownership interest (as a
shareholder, partner or otherwise) in any Competing Business. For purposes of
this Agreement, the term "Competing Business" shall mean: (a) the business of
providing (i) Internet services that include the providing of Internet business
and E-commerce solutions, (ii) video conference services and the maintenance of
sites for the provisions of such services, (b) furnishing technical aid or
assistance to anyone who engages in a business described in clause (a) above or
(c) the sale or attempted sale of products or services, similar to products or
services sold by Employer; provided, however, that this Section 10 shall not be
deemed to prevent the Employee's ownership of 1% or less of the capital stock of
any publicly held entity.
11. Non-Solicitation of Customers. The Employee agrees that, during the
Employee's employment with the Employer or any other member of the Calton Group
and until the fourth anniversary (second anniversary in the event of a Section
6(c) Termination) of the termination of Employee's employment with the Company,
the Employee shall not, directly or indirectly (i) interfere with Employer's
business relationship with or solicit the trade of, or trade with, any customer
of the Employer or iAW for whom the Employer, iAW or any member of the Calton
Group in the same or similar business has provided products or services within
the prior two year period for any business purpose other than for the benefit of
the Employer or (ii) solicit the trade of, or trade with, any prospective
customer that was solicited by Employer or iAW or any member of the Calton Group
in the same or similar business within the prior two year period for any
business purpose other than for the benefit of Employer.
7
<PAGE>
12. Non-Solicitation of Employees and Former Employees. The Employee agrees
that, during the Employee's employment with the Employer or any other member of
the Calton Group and until the fourth anniversary of the termination of such
employment for any reason whatsoever, including without limitation termination
for cause or without cause, the Employee shall not, directly or indirectly,
solicit or induce, or attempt to solicit or induce, any employee of the Employer
or any other member of the Calton Group to leave the Employer or such other
member of the Calton Group for any reason whatsoever or hire any employee of the
Employer or any other member of the Calton Group or person who was employed by
the Employer or any other member of the Calton Group at any time during the two
year period preceding the date of the Employee's termination.
13. Effect of Employer or Calton Breach. In the event that Employer and/or
Calton breaches a material provision of this Agreement, then in such event
Employee shall cease to be bound by the provisions of Sections 10, 11 and 12 of
this Agreement.
14. Severability. The covenants contained herein shall be construed as a
series of separate and severable covenants which are identical in terms except
for subject matter and temporal duration. The Employee and the Employer agree
that if any court of competent jurisdiction determines that any such separate
covenant is not fully enforceable, such covenant shall be deemed modified or
severed and that the remainder of such covenant and of this Agreement shall be
enforced to the fullest extent permitted by applicable law.
15. Injunctive Relief. The Employee acknowledges and agrees that the
services to be rendered by the Employee to the Employer or any other member of
the Calton Group are of a special and unique character and that any breach of
the covenants herein would cause irreparable harm. The Employer shall have the
right to injunctive relief, in addition to all of its other rights and remedies
at law or in equity, to enforce the provisions of this Agreement. If the
Employer is awarded an injunction or other remedy in connection with the
enforcement of such provisions, the Employee further agrees to pay all costs and
expenses (including attorneys' fees) reasonably incurred by the Employer in such
enforcement effort.
16. Obligation to Inform Succeeding Employers. Until the fourth anniversary
of the termination of the Employee's employment with the Employer and the other
members of the Calton Group for any reason whatsoever, including, without
limitation, termination for cause or without cause, the Employee agrees (a) to
inform each of his subsequent employers, prior to accepting his employment, of
the existence of this Agreement and to provide such employer with a copy of this
Agreement and (b) to inform the Employer, upon the acceptance of employment, of
the identify of his new employer, the nature of such employer's business and the
Employee's new position, duties and responsibilities.
17. Assignment. The rights and duties of the parties to this Agreement
shall not be assignable by either party, except that this Agreement and all the
rights hereunder may be assigned by the Employer to any corporation or other
business entity that succeeds to all or substantially all of the Employer's
business through merger, consolidation, or corporate reorganization, or by
acquisition of all or substantially all of the assets of the Employer, and
assumes the Employer's obligations under this Agreement.
18. Notices. All notices, consents, requests, instructions, approvals and
other communications which may be or are required to be given, served or sent by
any party to any other party pursuant to this Agreement shall be in writing and
shall be mailed by first-class,
8
<PAGE>
registered or certified mail, return receipt requested, postage prepaid, or
transmitted by hand delivery, overnight courier or telecopy, addressed as
follows:
If to the Employer, to:
iAW, Inc.
333 17th Street, Suite D
Vero Beach, Florida 32969
Telecopy: (561) 569-6360
Attention: Kenneth D. Hill
with a copy to:
Calton, Inc.
125 Half Mile Road, Suite 206
Red Bank, New Jersey 07701
Telecopy: (732) 212-1290
Attention: Anthony J. Caldarone
If to the Employee, to:
Kenneth D. Hill
167 Anchor Drive
Vero Beach, Florida 32963
or, in each case, at such other address as may be specified in writing to the
other parties hereto. Any notice so addressed shall be deemed to be given (x)
three business days after being mailed by first-class, registered or certified
mail, return receipt requested, postage prepaid and (y) upon delivery, if
transmitted by hand delivery, overnight courier or telecopy.
19. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
20. Entire Agreement. This Agreement supersedes all prior agreements
whether written or oral and constitutes the entire agreement between the parties
with respect to the subject matter hereof. There shall be no modification,
amendment, waiver or alteration of this Agreement, except in writing and signed
by a duly authorized officer of the Employer and the Employee. Any waiver of any
terms or conditions hereof by the Employer shall not be construed as a
continuing waiver but shall only apply to the particular transaction involved.
21. Withholding. Any payments provided for herein shall be reduced by any
amounts required to be withheld by the Employer from time to time under
applicable Federal, State or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
22. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
9
<PAGE>
Calton Homes of Florida, Inc.
By:
-------------------------------
Anthony J. Caldarone, President
Calton, Inc.
By:
-------------------------------
Anthony J. Caldarone, President
-------------------------------
Kenneth D. Hill
10
EXHIBIT 21
CALTON, INC. SUBSIDIARIES
State of
Company Incorporation
------- -------------
eCalton.com, Inc. (f/k/a Calton Homes of Florida, Inc.) Florida
Calton Homes of Chicago, Inc. Illinois
Calton Homes of Pennsylvania, Inc. Pennsylvania
Calton Homes of Pennsylvania at Pennway, Inc. Pennsylvania
Calton Homes of California, Inc. California
Calton Lindenwood Corporation California
Calton Manzanita Corporation California
Calton Tamarack Corporation California
Calton California Equity Corporation California
Calton Capital, Inc. New Jersey
Calton General, Inc. New Jersey
Calton Homes Finance, Inc. New Jersey
Calton Homes Finance II, Inc. New Jersey
Haddon Group of Virginia, Inc. New Jersey
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<CASH> 33,786,000
<SECURITIES> 1,339,000
<RECEIVABLES> 4,722,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 451,000
<PP&E> 155,000
<DEPRECIATION> (12,000)
<TOTAL-ASSETS> 40,441,00O
<CURRENT-LIABILITIES> 1,787,000
<BONDS> 0
0
0
<COMMON> 283,000
<OTHER-SE> 38,371,000
<TOTAL-LIABILITY-AND-EQUITY> 40,441,000
<SALES> 3,196,000
<TOTAL-REVENUES> 3,196,000
<CGS> 116,000
<TOTAL-COSTS> 116,000
<OTHER-EXPENSES> 1,966,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,114,000
<INCOME-TAX> 453,000
<INCOME-CONTINUING> 661,000
<DISCONTINUED> 4,178,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,839,000
<EPS-BASIC> .21
<EPS-DILUTED> .20
</TABLE>
